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Purchase Order Financing and Invoice Factoring - Cash Advance Tools for Business

Posted by Steve Barthol on Wed, Apr 23, 2014 @ 06:56 AM

So what is purchase order financing and how does it differ from invoice factoring? Both are viable solutions for when sales growth exceeds working capital but each option has slightly different ways to benefit your business.blog_4.23

PO funding is an excellent answer as a short-term financing option if you meet the necessary criteria to qualify. It enables companies to pay suppliers immediately, rather than using cash reserves. Sometimes factors such as seasonality or large unexpected orders will put a strain on the company cash flow and therefore the ability to fulfill valuable potential sales. Without easy access to readily accessible working capital your business risks losing orders from customers.

So how does this differ from invoice factoring? In order to factor you must have created an invoice and provided proof of delivery of any goods or services prior to receiving an advance on your accounts receivables. This is a great way to receive a cash advance on your invoices that would not normally be paid for a further 60 – 90 days. However, if that unexpected order comes in, it may be worth considering purchase order funding as another possible option to fund the purchase of goods to be re-sold to your customer prior to delivery.

So what happens if you need money up front to purchase the goods you will be selling on to your customer? Purchase order financing is an excellent answer when you are supplying a tangible product. You are essentially funding the payment of your product purchase prior to reselling the product to your customer. Invoice factoring obviously has many valuable benefits, but let’s consider some of the benefits of PO financing:

  • Uninterrupted sales growth even when orders can’t be supported by the balance sheet
  • Greater profits by fulfilling larger orders
  • Timely delivery to customers, no need to delay orders because of the inability to pay your suppliers
  • Growth through short-term financing solutions rather than long-term debt
  • Ability to meet seasonal sales peaks
  • No need to give up equity and control simply to keep pace with sales growth

Both purchase order financing and invoice factoring can help secure the order when cash flow is tight. Don’t allow those unexpected orders to go to your competitors; these financing options may work to help your company grow.

Bay View Funding has a dedicated team of financial experts who have been providing comprehensive factoring services to businesses - in a wide range of industries - for more than three decades. Whether you need funds for payroll or working capital to expand your business, invoice factoring can put cash in your pocket - in only 24 hours.

Our professional, dedicated sales and support staff are available to answer your questions.

Invoice Factoring Guide

Topics: Alternative Financing, About Invoice Factoring, Purchase Order Financing

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