Turn Your Purchase Orders Into Real-Time Cash!
ByTurn your purchase orders into cash right away.
You have assets in your business such as invoices and purchase orders to help you get control over your worrisome cash shortages, which are keeping you up at night. You don’t need to worry anymore, because I can help you get over your cash flow hurdles!
Have you been turned down for a loan from your bank? Asset based lending such as factoring or purchase order finance (POF) is often misunderstood. You can use POF when traditional banking options turn you down. Banks traditionally focus more on your business past performance. Purchase order finance lenders look at the value of your business assets (E.G., invoices and purchase orders).
POF Defined
Purchase order finance is a financial service that enables a business to purchase raw materials or finished goods for products to be sold in a matter of weeks. It is short term financing and usually paid off within 30 to 60 days.
For example, “The San Jose, California Police Department received an order for one hundred servers, dual processor computers” The police department used a purchase order to buy their servers from Dell Computers. Dell promised to deliver the order in 30 days. Dell used POF once Dell received the PO from the police department so they would have the cash on-hand to pay their suppliers for computer parts and salaries to build the 100 servers which the San Jose Police Department ordered.
I’m making the assumption that Dell needs to use POF because they are cash constrained or they use POF as a financing strategy. This is an over-simplified example, but it gives you the ways how POF could be used to finance your transaction. I have more examples below to help you further understand how POF (or asset-based lending) can work for you.
Benefits of Purchase Order Financing
- Expand your capacity with your key suppliers
- Guarantee timely deliveries to your customers
- Take on larger orders to increase your financial bottom line
- Expand your business without increasing your debt or selling equity
- Leverage cash now to pay your suppliers, for marketing, payroll expenses, and other things you need in the short-term
POF will work for your business if you have orders from creditworthy customers, but don’t have cash right now to pay your suppliers so you can deliver the product or service to your buyer. When you find yourself in the position of not being able to promptly fill your customer’s purchase order, this can be a precarious situation for you. You may be at risk of losing the order and the profit to help you pay for critical operating expenses. Beyond your inability to deliver the product or service on time, you may lose future orders from this buyer. And that ain’t good!
You will need PO financing when:
- You need expertise to handle the financing
- You need additional working capital
- You need a quick response to an immediate sales need
- You don’t want to incur additional credit risk (domestic nor foreign)
- You don’t want your Customers and sellers to know each other
- You want the opportunity to make additional profit
Purchase Order Finance Criteria
- Management expertise and proven products
- Well developed sourcing strategy
- Bona fide and Non-cancelable purchase orders
Candidates for Purchase Order Finance
- Companies in start-up or growth phases can use your purchase order or contract from a credit worthy customer to pay for your raw materials, products, and payroll. POF is a great financing option for companies involved in Intellectual Property, Start-Ups, Services, or Consulting. You probably recognize all of these situations include companies that have no hard assets as collateral.
- Your customer must be reputable with a good credit line. And, your purchase order must be verifiable.
- Usually POF is more expensive than factoring your invoices. It’s another financing alternative for start-ups, companies less than 2 years old, and companies with the opportunity to grow. One good thing about POF for you is your company can avoid debt payments and you don’t have to give up any equity for Venture Capital funding.
The POF Process
I offer factoring and purchase order finance through my Money Tree Program. Money Tree qualifies you and your customers and suppliers, and manages distribution of funds.
The process is straightforward. You provide me with a copy of your customer order and a cost projection of your cash requirements to fill your customer’s order.
I pay your vendors or suppliers directly for goods or services you need to deliver your customer’s order. Once you’ve delivered the goods or services and they’re accepted by your customer, you then have an accounts receivable. At that point your contract with my MONEY TREE program will convert to a Factoring transaction.
International Business
Your suppliers may be located outside the United States. I can help you make payments to your foreign suppliers through Commercial Letters of Credit. Commercial Letters of Credit can shield you from the danger of importing products from foreign suppliers. I’ll give you examples of how this is done in future posts.
Call me right now at (866) 323-9123 with your POF questions and concerns.
In my next post, I will discuss the MONEY TREE program and how it can benefit your business; just one of the many resources at Donald Hunter(TM) Financial. Contact me for your personal complimentary consultation and sign up to receive a free copy of my Business Survival Guide for 2010.
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