WHAT IS PURCHASE ORDER FINANCING
Purchase Order (PO) Financing, is a type of commercial financing that allows a business to receive funding for a pre-ordered project using the purchase order from the client as collateral. Many times, small or growing businesses will not have the funds on hand that they need in order to purchase all of the materials necessary for a big job, nor can they obtain credit from a traditional financial institution based on their credit alone with only a purchase order in hand. The difference between PO financing and traditional bank financing is that PO financing bases its credit decision on the financial strength of your customer; a bank would focus on your finances alone regardless of any purchase order promising future income.
That’s Where Capstone’s PO Financing Comes In.
- Easy
- Immediate
- Flexible
Purchase order financing can remove barriers to growth that traditional financing might cause. It also has a generally faster underwriting time compared to traditional commercial loans. With PO financing, Capstone will make the payments to your suppliers, we receive payment from your customer when it is due, and your profit is paid directly to you after payment is received.
Purchase order financing enables a company to:
- Process large orders and expand production without worrying about depleting cash reserves or drawing down on a bank line of credit
- Obtain financing for presold goods and inventory to promote business growth and opportunity
- Maintain its reputation as a business worth continuing to work with
- Continue growing without needing to obtain new financing
Capstone’s purchase order financing program is used to finance the purchase or manufacture of specific goods that are presold by our clients to their creditworthy customers.
Purchase order financing can revolutionize growing businesses by:
- Increasing working capital needed to support and enhance sales
- Increasing product availability
- Creating flexible credit terms for customers
- Enabling businesses to accept larger orders and make more frequent bids
- Allowing businesses to grow and better compete within its industry
Typically, this structure is combined with one of our factoring programs to finance the entire trade cycle. The trade cycle is the amount of time it takes a company to turn an order from a customer into a payment from a customer. With a combination of funding upfront to cover supplies from the purchase order and reliable cash flow from factoring, businesses can ensure they never lack funds to complete an order or to continue taking on additional orders.
Purchase order financing can help any business or contractor including but not limited to:
- Electricians
- Painters
- Architects
- Landscaping
- HVAC Contractors
- Plumbing Contractors
- Steel Fabrication
- Carpenters
- Concrete Contractors
- Roofing Contractors
- Staffing Companies
- Environmental Companies
- General Contractors
- Government/ Municipal Contractors
Typical clients (selling finished goods) include:
- Suppliers and Distributors
- Manufacturers
- Retail and Apparel
- Importers/ Exporters
Purchase order financing may sometimes cover up to 100% of the supplies needed to complete a job. Without this crucial piece, your potential to take on high volume jobs could be lost. If you turn down customers, your company’s reputation can be tarnished in the long run. Other future clients may think twice about calling you for a bid if they’ve heard you were not able to follow through on previous orders and certainly any customer you have had to turn down once will instead turn to your competitors. Purchase order financing can help you to continue to grow your business seamlessly without any hindrance from a lack of cash on hand to cover supplies.
Capstone buys our client’s products from both offshore and domestic manufacturers. We then import goods to the United States or to a third country. Next, Capstone receives, stores and delivers merchandise to the clients’ wholesale buyers and creates working capital for our clients.
Consider the following scenarios to gain a better understanding of what purchase order financing can do for your business today:
- You are a highly seasonal business, such as a landscaper or painter, and at the peak of your season, you obtain a much higher volume of orders than expected. PO financing will allow you to take on those orders and successfully meet your clients’ needs, without having to decide which work you can complete and which you cannot afford to accept.
- You run a remodeling business and have an existing line of credit from a traditional bank, which you have been using to cover gaps in cash flow when supplies are needed for larger orders. However, because word of mouth has reached a large commercial client, they want to do business with you on a project much bigger than you have done before. Your line of credit cannot be increased because you don’t yet have the history to show that it is justified financially. Purchase order financing will look at your new customer’s credit, not your own. Based on the purchase order amount it will help finance the supplies you need so you don’t have to forego that opportunity.
Capstone is committed to helping businesses in various industries. For more information regarding our purchase order financing options, please call us at (212) 755-3636 to speak with a representative today. We will work with you to develop a customized financing program that will allow you to accept larger contracts, purchase raw materials needed to fill existing contracts, or meet your immediate cash flow needs.
