Can Purchase Order Funding Increase Cash Flow?

Posted by Factor Funding Co. on March 28, 2017

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Small businesses, particularly startups, are always searching for ways to increase cash flow. One of your best options might be purchase order funding. Startup owners often find this method intimidating, but once you become familiar with it, purchase order funding does much to increase your customer base, credibility, and success. Purchase order funding ensures you get the cash you need to deliver what the customer expects, whether that’s a large order of products or a complex service they don’t receive from other businesses in your area.

Why Purchase Order Funding is Essential

Most business owners don’t expect to deal with large orders right away. However, demand for products and services grows before you know it. Often, businesses don’t have the collateral, cash, or raw materials they need to keep up with customers’ orders and other expectations. When this happens, business owners can use purchase order funding, or PO funding, to provide needed capital. The capital is used to pay suppliers for purchased orders ahead of time. Although it’s meant as a short-term solution, PO funding can be used for any amount of orders you desire.

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PO funding flows with your cash flow, responding naturally to market upswings and downturns. Without a long-term commitment, you and your suppliers avoid getting locked into expensive payment cycles. Additionally, PO funding agreements are easily changed to reflect the supplies you need vs. those you can get for yourself.

Who is PO Funding for?

Purchase order funding can work for almost any business, whether you’re a startup or well-established. PO funding is not as closely regulated as traditional loans, nor does it require years of financials, collateral, and endless paperwork. Business owners often find it more flexible and easier to understand than traditional loans. PO funding can help your business even if you have bad or questionable credit, because you don’t need proof of established financials. Additionally, it’s a good option for those with small business credit cards, because providers can use the cards to pay suppliers directly. This frees up the business owner to focus on paying more pressing bills, as well as making purchases or implementing new ideas to grow his or her business.

How PO Funding Improves Cash Flow

As the name implies, cash flow ebbs and flows with the local, state, and at times federal economy. Sometimes business owners find themselves in a bind because they need cash immediately, but have no easy way to obtain it. Purchase order funding often solves this problem. When you enter into a contract with a PO funding company, their end involves immediately providing the cash you need. Thus, you fill orders more quickly and increase your credibility. With increased credibility comes an increased customer base and more orders, which eases your financial burden and ensures your contract is fulfilled quickly. Your sales department in particular will grow significantly, as will others. For instance, the money you save using purchase order funding could go toward helping your creative team improve technology or test more products.

How Will PO Funding Affect My Budget?

Most companies, especially startups, see PO funding as an extra expense. They aren’t aware PO funding may help the budget. With PO funding, you may never have to worry about slow business seasons or cash crunch times again, because you only make transactions with suppliers as needed. Thus, your money can be spent on more important business aspects, such as payroll. Additionally, budgeting for supplies through PO funding ahead of time keeps you from overextending yourself. You’re less likely to buy supplies you don’t need, or overestimate what your customers will ask for, which keeps you out of debt. Budgeting only for the supplies you need may actually help you stay on top of demand rather than drowning in it.

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