Purchase Order Financing – Trade Finance
Purchase order financing is an excellent method for a business to obtain quick capital when they need it in order to capitalize on a large order from a client. It is a great solution for when cash flow reserves are low.
Difficulties arise in many businesses because their suppliers want to be paid upfront with a C.O.D., but a company’s customers on the other end of the transaction want to pay on net 30 or net 60-day terms.
Cash flow is a common problem for manufacturing companies, especially because while goods are in transit, invoices are not paid. Purchase order financing frees up a company’s cash for critical business expenses or to fulfill larger orders.
Another benefit is that it does not show up as debt for the owner’s business.
This makes it possible to not only use the extra cash to get discounts on purchases, but it also allows a business to get approved for more financing.