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Purchase Order Financing

For brands just starting out, or for those that don’t have a ton of capital to use as a cushion, paying suppliers can sometimes be a burdensome headache that adds to the stress of growing a business. Even normal brand-growing pains can be intense, and business owners often feel they’re walking a fine line of being able to keep product moving, and maxing out their financial capacity to simply pay the bills. Without a small business loan, a line of credit or some other source of funding, it can feel impossible to grow. 

PO financing options can help stressed business owners figure out how to pay suppliers the purchase order costs they need to, while keeping cash on hand so they can focus on more important aspects of their business…like continue to grow. 

If you’re lacking an influx of capital, purchase order financing companies may be able to offer much-needed capital, so you can sail through the process of your operations, from a customer ordering, to the manufacturing of your product, to the shipping and delivery, without the stress of wondering how you’ll keep up with the financial aspect of POs.

How PO Financing Can Help Your Business Grow

Let’s start with the very basics. First, a customer orders from you. Then, simply by providing a letter of credit, you can use purchase order funding to order from your supplier. The supplier will produce and ship the product you need, confident that they’ll be paid. 

Learn more about how PO financing works with our detailed step-by-step process below.

Increase Working Capital

Purchase order financing is a fairly simple concept. If you have a number of orders come in, or even just one large order, and you think you’ll have a difficult time paying your supplier up front to get the order processed and moving, you can utilize PO financing to ease pressure related to cash flow problems until you’re paid for the order.

Reduce Reliance on Supplier Credit

One of the many goals businesses often have is reducing as much credit reliance as possible and becoming a cash-positive business. Purchase order financing can be an effective way to do this, because it can essentially eliminate the gap between the time you submit a PO, and when an invoice is processed, fulfilled and paid so you can settle up with your supplier.

Gives You A Competitive Edge

Competition is everything in business, and PO financing can offer a huge competitive edge. It has the potential to allow brands to remove the roadblocks a lot of other businesses likely face as they try to compete against huge brands with tons of buying power. Not having to rely on supplier credit, increasing your working capital, can really be a game-changer as you grow your brand and increase your reach.

How purchase order financing works

  1. You receive a purchase order from your customer: Once your customer has completed their order, you’re ready to move!

  2. You place an order with the supplier: Order in hand, you turn to your trusted supplier, who’ll take the PO and begin to fulfill the order, so you can get your customer their product, as quickly and efficiently as possible.

  3. Assembled Brands reviews your supplier invoices and underlying purchase order: Assembled Brands makes the process as easy as possible. We can either fund the manufacturer directly, or we can send the funds to you. Most brands we work with see an average of up to 50 percent of their production run costs covered when they use our PO finance options.

  4. Supplier sends you the goods: With funding secured and relatively low to no risk to them, your supplier will produce and ship your products. They receive payment and don't have to worry.

  5. You invoice your client: Once product has been shipped by your supplier, you can invoice your customer to collect any balance due.
     
  6. You collect on the invoices and Assembled Brands is repaid: Once the customer pays, you’re ready to start repaying Assembled Brands. The process is complete, you’ve kept your workflow and business model running smoothly, your customer is happy, you have the funds to pay your supplier, and best of all…you’re continuing to grow your business, without added stress on your cash flow.

Frequently Asked Questions

  • How Much Does Purchase Order Financing Cost?
    • Purchase order financing rates vary depending on multiple factors, but you can be confident that Assembled Brands offers market competitive interest rates, and the benefits tend to far surpass traditional banking loan options.

       

  • PO Financing vs. Invoice Factoring - What’s the Difference?
    • While purchase order financing and invoice factoring are both types of financing that can be beneficial for businesses experiencing cash flow issues, there actually is a clear difference. 
    • When you use purchase order financing, you’re benefiting from an advance in capital that allows you to fill a customer’s order. Invoice factoring, by contrast, helps businesses who need an advance in capital while they wait for a customer to pay an invoice for an already-completed order.

       

  • What Is Factoring In Purchase Order Financing?
    • “Factoring” is an alternative form of financing that aims to improve cash flow when a business sells an accounts receivables invoice to a third party at a discounted price (typically somewhere between 80 - 90 percent of the full invoice value). This gives a potentially-struggling brand immediate cash without the hassle of having to wait for their customer to pay. 
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