Purchase order financing has become a popular tool to assist certain businesses that need funds to enable them to fulfill large purchase orders. It helps a company finance growth. Such as, experiencing a surge in demand, when cash flow is consistently tight, or when a company wants to reduce capital tied-up in longer-pay overseas orders. 

Who Can Qualify for Purchase Order Financing 

Businesses that can use purchase order financing include distributors, wholesalers, resellers, importers or exporters of finished goods, and outsourced manufacturers.  

To qualify, a business must: 

• Sell finished tangible goods to business (B2B) or government (B2G) customers.  

• Have a profit margin of 15 to 30 percent (varies by financing company.)  

• Have an order value worth a minimum of $100,000.  

• Use a non-cancelable purchase order.  

• Not be used for the first transaction for the product being sold.  

• Not be used for a consignment sale.  

• The business and the client must have a good credit history.   

Benefits of Purchase Order Financing 

There are five primary benefits of purchase order financing: 

• Allows a business to accept large new orders.  

•Available to both existing and new businesses if they meet the qualifications.  

• It can cover up to 100 percent of your supplier costs, as long as your gross margin meets the financing company’s minimum threshold.  

• The financing arrangement can grow as your business grows. Based on your customer’s credit history, the quality of your purchase order, your supplier’s performance record, and your ability to complete the order satisfactorily.  

• Financing can be set up quickly.   

Disadvantages of Purchase Order Financing 

The disadvantages include that this financing only applies to certain types of businesses. Those that are re-selling a product, and it only cover supplier expenses that are directly related to completing the order. And it only works for large high-margin transactions. 

Seek Expert Funding Assistance to Achieve Your Goals 

Contact Aspen Capital Solutions, based in Atlanta, GA for customized financial solutions to meet your needs. We provide a wide range of financial products with financial expertise you can trust.