Purchase Order Loans and P.O. Loans
Are your sales outpacing your incoming cash flow? Purchase order loans advance payment on your behalf to buy or produce the goods to fulfill the order.
Purchase order loans, purchase order funding, and production/pre-delivery financing are all the same service.
Purchase order funding provides:
- Short-term financing
- Advance payment
- Assurance to a supplier
So you can obtain and deliver on goods ordered or sold.
A purchase order loan tells a supplier that a buyer, middleman, or end-user has purchased a product from you and you, the seller, have the funds to pay for it.
Uncertain cash flow is a common problem for product manufacturers and wholesalers. Purchase order funding provides cash and the proof of ability to pay suppliers so you can procure materials for manufacture or resale products.
A purchase order loan bridges the gap between sale and payment and has the advantage of being faster and easier to obtain than a traditional bank loan, especially with today’s more stringent loan requirements. A P.O. loan is based on the creditworthiness of your buyer, not you, so your credit rating does not matter. Round Table Financial takes on all the risk.
How Does It Work?
A Purchase Order (P.O.) is a request from a buyer to a seller for a tangible product. A typical purchase order lists the amount of goods needed and the terms and conditions of delivery and payment.
When a business receives an order for a product, it instructs its resources to fill the order. Occasionally, a business may be in a position where it is unable to fulfill a buyer’s order because it lacks materials or the cash to acquire them.
When this happens, the business risks losing both the order and the customer. A purchase order funding program can tide you over.
Our clients use purchase order funding as a source of capital, assurance, or guarantee that comes as a:
- Check, advance if backed by accounts receivables
- Bank transfer, in advance if backed by accounts receivables
- Letter of Credit (LOC), based on type and conditions
They now have funds to acquire materials or finished goods and fulfill the buyer’s order, as long as there is sufficient margin to accommodate the costs of funding as well as make a profit.
A purchase order loan pays up to 100% of the cost of goods or 70% of the purchase order value.
The Process
Getting purchase order funding is really quite simple.
- You receive a purchase order (P.O.) from a buyer for product.
- You apply to a company, like Round Table Financial, to qualify for a purchase order loan.
- Upon acceptance, usually within 24 to 48 hours, you send your customer’s P.O. to the funding company.
- Round Table Financial advances a portion of the value of the P.O. as a check or bank transfer or as a Letter of Credit (LOC).
- You use the funds or assurance of financial ability to purchase materials or product from your supplier.
- Round Table Financial collects the invoice and payment from your customer.
- Round Table Financial forwards the balance of your profits minus a fee to you.
Once you have qualified for our service, your next purchase order loan will be available even faster.
Requirements for Purchase Order Funding
The Purchase Order (P.O.) must be:
- For pre-sold, tangible products
- For non-consignment sale
- Non-cancellable
- Issued by a legally registered and credit-worthy buyer or payer
- For finished goods (preferably)
- For product available for resale on the open market in case of recovery
- For guaranteed payment or assurance to be issued directly to suppliers on your behalf
PO loans tend to be short-term and somewhat more expensive than traditional financing but make up for it by being easier to obtain. Purchase order funding is perfect for startups and small businesses selling products that meet the requirements listed.
Some P.O. funding companies only offer a letter of credit. At Round Table Financial, we also offer the alternative of cash payments, check, or bank transfer.
Documentation Required
To complete the loan application, we may ask for some or all of the following:
- Copies of Articles of Incorporation and By Laws
- Copy of Fictitious Name Filing (if applicable)
- Copy of Partnership Agreement (if applicable)
- Financial statements
- Schedule of aged accounts receivable
- Copy of 941 withholding tax filings & proof of payment
Who Uses P.O. Loans?
Some business leaders who benefit from purchase order loans include:
- Importers
- Exporters
- Wholesalers
- Assemblers
- Distributors
- Manufacturers…
…with rapidly growing sales, capital constraints, seasonal sales spikes, high development costs, volatile sales, new product launches, or other situations where they are cash-strapped.
To request a purchase order loan, please submit a purchase order funding application and appropriate support documents or call us at 949 506-1515.
Round Table Financial provides purchase order loans and other short term funding and business services throughout the United States.
Don’t try to float debt on credit cards or consider other creative financing solutions that could risk your credit. Contact Round Table Financial to learn how to reduce your credit risk and grow your business through our purchase order funding program.