Purchase order financing (also called purchase order financing or funding) is way that you can pay your seller upfront, allowing you to pursue a greater range of opportunities for profit. Most resellers find at some point that there are suppliers that wish to sell you different sorts of goods, but are unwilling to do so unless you pay them upfront, which you are unable to do—or alternatively, they may be willing to let you defer payments, so that you can sell the goods to other customers and pay them when you’re ready, but the financing options they present you with are simply attractive to you. Purchase order financing is one good way you can pursue such an order.
In order to take advantage of this financing, you should contact a company, called a factor, that will assist you in financing the purchase of the goods from your supplier. The factor will pay for the goods on your behalf so that you can then resell or distribute them to your customers, who will then pay you. As customers pay you you’ll be required to pay the factor. Purchase order financing will increase the total number of transactions, which will cost you extra, but you’re your only other alternative is passing up a purchase order, it may be worth it in the long run.
Keep in mind that different factors have different options and requirements for financing and the factor will first look into the circumstances involved. What follows are some of the most standard requirements
1. If your customer(s) don’t appear to be credit worthy, the factor may not get paid back in full, and thus may not want to do business with you.
2. If you’re looking to obtain less than $100,000 in purchase order financing, you will probably get turned down by most factors.
Your profit margin should be at least 10%.
Your company needs to resell or distribute finished products.
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