As a small business owner, there is nothing more frustrating than having the chance to expand your business or take on a new contract but lacking the immediate cash flow to do so. This is particularly problematic when all you need is cash to purchase materials or inventory to complete the job.
This situation is very common for small businesses, both new businesses and startups as well as for established businesses with a larger than typical contract or project. In these situations, purchase order financing can be the answer to your cash flow problem, and one United Capital is able to provide.
What is Purchase Order Financing?
We understand terminology in the funding sector can be confusing. Purchase order financing is not a loan, and it is not factoring. Instead it is the funding, through a third-party company for inventory or materials prior to invoicing your customer.
Purchase order financing is not commonly offered by banks or traditional business lending institutes. They may offer loans for established small businesses, but these will come with fees, costs, and the requirement to repay with interest on a set repayment schedule.
Purchase order financing has none of these issues. It is not debt, but rather it is an funding opportunity for a small business. This is typically a short-term arrangement, and there are fees involved, but they are considerably less in most situations than the time and costs associate in obtaining a traditional bank loan or line of credit.
It is important for a small business to carefully review the services offered by a purchase order finance company. Look for a business with experience in industry, imports, exports or manufacturing.
Paying Off Purchase Order Finance
Purchase order financing is used prior to generating an invoice to the customer. Once this invoice is generated and sent, a small business can turn to our factoring firm to obtain funding based on the value of the invoice or some or all of the accounts receivables for the business.
In addition, we will pay the purchase order financing advances. This payment will include the amount advanced as well as any fees, ensuring there is no debt against the business and limiting any possible fees and penalties with the purchase order financing.
We will then provide any balance of the funding, less fees, to the small business. This process virtually eliminates the need for loans while providing your small business with the operating capital you need, before and after invoicing, and without any debt.
