Purchase Order Financing

Written by Robert Mac
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Purchase order financing creates cash from your P.O.s while you are waiting for them to process. Once a supplier accepts a purchase order, it is a binding contract--and therefore worth value. You can use purchase order financing to buy supplies or inventory, pay payroll expenses, or secure a letter of credit.

A quick way to convert unpaid purchase orders or other contracts to working capital is through purchase order financing. Since a P.O. is a contractual obligation with a supplier of goods or services, it has an agreed upon monetary value. Rather than waiting for a check to be cut to cover the cost of the purchase order, a number of financial services can supply cash instead.

Other Uses for Purchase Order Financing

Some secondary uses of P.O. funding may include rent and equipment leasing expenses, duties and taxes, and overhead costs such as utilities and warehouse fees. You might also use this funding to cover printing, packaging, and shipping fees associated with your business. In fact, converting a purchase order into capital can pay for most of your business expenses.

There are a number of factors that determine whether your business qualifies for funding with purchase orders, including the profit margin of the P.O. in question. Like many financial agreements, there can be a number of specific criteria for all parties involved. For any arrangement of this sort, it is highly recommended to consult with specialists or advisors who can guide you and answer any questions you have.

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