Tuesday, 12 November 2013

Resolving your Cash Needs for Fulfilling Orders

Businesses frequently receive large orders with high profit margin from their valued customers. Though, to fulfill these orders, they may not have sufficient working capital as the suppliers usually expect full or partial payment before they start production. Lack of funds will inevitably delay the order fulfillment process, and the company may lose a big order and an even bigger customer. Trying to get a loan may be futile since banks are not likely to increase the line of credit. During this kind of business contingency, getting into a purchase order financing agreement with a professional factoring company can beat the financial heat.

Following are some of the common business situations, where PO financing could prove to be handy:

• When a business receives large orders during peak season.

• A start-up business with low commercial line of credit.

• Small businesses that are trying to expand and aiming to become a mid-sized business, but don’t have enough working capital to meet the financial requirements.

When you receive a huge order, you need enough money to fulfill it. You need to hire workers, buy raw materials and meet operational expenses; and every passing moment may increase the possibility to miss out on the order. You can have a concrete solution to this serious problem. It’s rather simple and effective. After getting the purchase order (PO) from your customer, you can contact a good factoring company. Once the PO qualifies the due diligence, the factoring company issues a letter of credit to the supplier comprising a financial guarantee so that the supplier fulfills the manufacturing requirements. After the order is fulfilled, you can receive payment from your client, pay the charges for purchase order financing and keep the rest of the profit.

Purchase order financing agreement is a practical funding option that may help you grow your business by efficiently fulfilling larger orders. For the required working capital issue, the POs can be used immediately, and you will never have to face the risk of losing a big merchandise order.

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