What is Purchase Order Funding?
Cash flow is a common problem that exists amongst many businesses. If a company lands a large purchase order but doesn’t have the funds to pay for manufacturing and delivery, the impact can be staggering. So often times, companies turn to high interest rate business loans – which themselves come with a host of issues for scaling.
Purchase Order Funding (also known as PO Financing) is a lower-risk option that cash-strapped businesses can turn to when they need to finance growth quickly.
By definition, PO Financing is when a company finances the production, acquisition, or manufacturing of a product for resale. This accommodation is made to help a company deliver product to a credit worthy customer. Many people turn to this option to avoid short-term high interest cash flow loans. With so many financing options in the market today, suppliers find this method to be low cost and allow for the highest availability of capital to fill their customer orders.
Purchase order funding is a finance option that allows companies to fill single or multiple customer orders and avoid the risk of losing business. Working with the business to meet demands, money is advanced against a purchase order for finished goods or products in order to finance the manufacturing of the products. What’s better is that it’s unlike a bank loan where financing depends on the credit of a company. With PO financing, funding hinges on the financial strength and credit of the customer placing the order—making it a great option for those companies who have a strong track record of on-time payments.
Learn more about the two main types of PO Financing:
Why is PO Funding important?
Losing out on a large purchase order due to lack of funds can have major negative impacts on a business. From losing the order and revenue stream—to putting your customer relationship on the line, those who depend on you might think twice next time they need to place an order. Additionally, if word spreads throughout your organizations that you’re not able to fund orders, it may put a strain on employee relationships.
Who does PO Funding help?
Our PO financing options are a great fit for businesses where growth outpaces available funds, increased seasonal sales, or when funding from existing sources are insufficient. With purchase order financing, entrepreneurs and businesses are able to focus on running their business rather than worry about financing their daily cash needs.
Additionally, STAR Funding permits companies to bid for larger contracts by providing up to 100% funding for a transaction. And while most finance companies will only consider funding finished products, we consider both finished goods and work in process depending on a variety of factors. STAR Funding offers liquidity, acceleration of cash flow and safety for your growing business needs. In addition, our support and expertise will put minds at ease, knowing customer POs can be filled each and every time.
How does PO Funding work?
After you receive a purchase order from your customer STAR will begin to arrange the financing. STAR will cover the costs of up to 100% of your cost of goods that are pre sold to credit worthy end customers. If necessary, your duties, freight, and other expenses can be paid for as well. Important to note, it’s not a Purchase Order Loan.
What are PO Funding Rates?
Purchase Order Financing rates depend on a number of factors. Are you financing finished goods or Work In Process(WIP)? How long is the transaction? What is the exposure your PO Finance company is taking throughout the transaction.
Get Started with PO Funding
Applying for Purchase Order Funding is simple. Contact us today and we’ll conduct a quick review of your current or projected transactions and provide an answer in minutes. Whether you need it now or are planning for the future, it’s never too early to have a finance plan in place.
About STAR Funding
For over 17 years, STAR Funding has been one of the top purchase order financing companies providing working capital to entrepreneurs to continue growing and operating their businesses. Ensuring a smooth transaction process, we’ll work with your customers to provide secure, cost effective letters of credit as well as unsurpassed customer support.