How Purchase Order Funding Works
Commonly Asked Questions
Table of Contents
- Does receivable funding make good business sense?
- We have exhausted our bank line of credit and need more capital. Can you help?
- How much does it cost?
- Do we have to finance every invoice?
- My business is new and has no credit history. Can I qualify?
- Do I have to sign a long term contract?
Does receivable funding & PO Funding make good business sense?
Yes! Many firms use these programs when cash flow is tight due to slow paying clients or when traditional financing is unavailable or insufficient to fund growth.
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We have exhausted our bank line of credit and need more capital. Can you help?
Our funding programs works in synergy with traditional credit lines. In addition, since receivable funding is not a loan, no debt is created, which strengthens your company’s financial position.
Often when a company has a term loan or bank line of credit, the bank will place a blanket UCC filing on all company assets. The finance company will require a first position on the accounts receivable, so your bank will need to take a second position on the receivables.
Many bankers are willing to work together with another finance company in order to help a client grow. As the company grows the bank loan becomes more secure and can often be paid off sooner with additional funding.
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How much does it Cost?
Fees are only pennies on the dollar. In fact, it can cost you more not to participate in these funding programs.
Consider this example - You have $100,000 of receivables on your books and $15,000 cash in the bank. You receive a purchase order and need $30,000 to fulfill the order and earn a 20% profit margin. Since you are short $15,000, you lose the order because you can not pay the vendor. If you had a receivable credit line you could convert some of your outstanding invoices into $15,000 to fulfill the order. The cost may have been 4%, still resulting in a 16% profit margin and a satisfied customer
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Do we have to finance every invoice or purchase order?
No; finance one or as many as you need to meet your needs.
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My business is new & has no credit history. Can I qualify?
We base decisions on the creditworthiness of your clients. As long as you have at least one creditworthy client, then you are likely eligible for this financing.
In addition, lack of personal credit or poor personal credit will not disqualify you for this type of funding.
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Do we have to sign a long term contract?
No; finance your receivables for as short or as long as you would like. You are not locked-in for a minimum period.