Purchase order loans

Most business owners dream of the day that the opportunity for a large work order or contract comes along. Yet this dream may fall flat if they don't have the funds or credit to fill the order.

That's where a purchase order loan comes in.

What are purchase order loans?
Purchase order loans (also referred to as purchase order financing or purchase order funding) essentially provide business owners with an opportunity to quickly get the money needed to accept larger orders when your current funds are not enough to cover the expenses needed to fill the order.

Purchase order loans are a good option for businesses that don't qualify for bank loans. Purchase order financing qualifications are not as strict as traditional bank loans, and they are usually set up very quickly, so you have access to the cash needed to fill the order right away. The main requirement is that you have an order from a credit worthy commercial or government client.

What are the benefits of purchase order loans?
Purchase order loans have a number of benefits, including:

• Purchase order financing does not show up on your credit as debt against your business, making it so your credit is not maxed out and making it easier to get approved for more financing down the line.


• Purchase order loans allow you to accept large orders even if you don't have the money to fill the order.


• Purchase order financing is a good solution for people who have been turned down for loans or other financing options.


• The collateral for the funding is not your own personal or business assets, but rather the actual order from a reputable company.


• Purchase order financing is an especially attractive option to wholesalers and resellers of products.


• Purchase order loans can give you up to 100% of the funds needed to fill the order.


• The funds from purchase order loans are generally available very quickly, allowing you to fill the order in a timely basis.

How do you obtain a purchase order loan?
There are a number of purchase order loan firms to choose from. The process for obtaining a purchase order loan is pretty straightforward and similar with most companies:
The basic steps for getting a purchase order loan include:

• You receive a purchase order from a customer. (You can't obtain a purchase order loan without this; it will be used as collateral.)


• Find a reputable supplier for your goods and place an order with them. Then, the purchase order loan company sends a letter of credit to them.


• The purchase order is delivered and accepted by the customer, and your customers pays the invoice.

The whole process usually takes around a week, give or take a few days.

What are the requirements for obtaining a purchase order loan?
While each company differs a little in their requirements, they are, for the most part, similar. Some of the most common requirements include:

• The purchase order you present must be from a reliable business or government agency that has a track record of paying their invoices in 90 days or less.


• Your products must be manufactured by a third party


• Your profit margins must meet a certain number (typically 25%)

If your current cash flow is keeping you from accepting large orders from clients, a purchase order loan could be a good option.