Purchase Order Finance

4 Ways a Purchase Order Loan Can Boost Business

Posted by Factor Funding Co. on September 15, 2014

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Business owners often approach their financing options with great care. They want to avoid overextending themselves or tying up their assets in lines of credit that could compromise their access to profits and growth. However, when they need to get money to place manufacturing orders or satisfy customers' demands, owners may want to use a secure asset that does not compromise their revenue. When they contemplate securing a purchase order loan, they can be confident in their decision by realizing the key ways that this source of financing can boost their business.

1) Quick Access to Cash

People who apply for bank or credit union loans often must wait a few days, if not longer, to find out whether or not they are approved for the money. It can take a few more days to actually get the money deposited to their bank accounts. When they opt for a purchase order loan, however, people can enjoy quicker access to the cash they need to place manufacturing orders or take care of other priorities. The purchase order lender typically issues the funds within a day or two and sometimes sooner. Having immediate access to the funds they need to grow their businesses can be vital when they simply cannot wait to place an order with their factory.

2) No Credit Check

Business owners understand how carefully they must guard their credit reports. A hard hit on their credit can lower their scores and make it harder to get financed in the future. However, when they seek a purchase order loan, people can take comfort in the fact that their credit will not be scrutinized during the application process. The purchase order lender instead checks the credit of the client who placed the order with business owner's company. If the client's credit rating is solid and has a good history of paying its invoices, the lender may go ahead and issue the loan. The business owner keeps his or her credit intact and can use it to get financing from other sources in the future.

3) No Collateral

Being able to retain the business's assets can be critical for a person who wants to ensure his or her company's growth. When this individual applies for a loan at a bank, however, he or she may be asked to put up some of the business's furnishings, equipment, or other assets against the loan. A purchase order loan, however, utilizes the business's invoices as collateral and avoids laying claim to a company's furniture, computers, and more. The owner can continue his or her regular operations without fearing that at some point, the equipment on which the company relies will be claimed by the lender.

4) Retention of Profits

Perhaps one of the primary ways that purchase order loans help a business grow is through the retention of profits. Bank loans systematically take away from a business's profits through extended payments and high interest rates. After the owner finishes paying off a bank loan, he or she may have little left to show for it. However, a purchase order lender allows a company to keep most of its profits after it deducts the fees from the manufacturer's payment. Once the lender receives payment from the manufacturer, it takes out the fees associated with its loan and then passes the rest of the money to the borrower. This money can then be reinvested back into the company and used to grow the business.

Business owners often consider their finance options with great care. They can get the money they need and safeguard their credit rating and assets and ultimately build their businesses by opting for purchase order loans. This source of financing offers quick access to cash that can be used to place manufacturer orders.

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Written by Factor Funding Co.

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