Many companies — particularly small businesses — are curious about purchase order financing as a method to obtain working capital.

But what is purchase order financing, how does it work, and how might you use it to grow your business? These are the questions we will address in this article.

What is Purchase Order Financing?

Let’s start with a somewhat formal definition, and then we will simplify things. Purchase order financing is when a company assigns their purchase orders to another company (usually a working capital financing company) in exchange for cash flow. The purchase order would then be paid to the working capital finance company.

In other words, purchase order financing is a way to liquidate purchase orders to obtain much-needed working capital / cash flow. Many small and medium-sized businesses use this process to cover certain operational expenses, or to purchase supplies, materials, etc.

Who Should Seek Purchase Order Financing?

When pursuing any form of business financing, it’s important to remember that only you can decide what’s best for your business. Purchase order financing is a good idea for certain businesses in certain situations. But like any other type of financing, it may not be applicable in all situations.

Here’s a basic profile of a business that might benefit from purchase order financing:

• Purchase orders are a main part of the company’s revenue structure.
• The company needs additional working capital for operational costs, acquisitions, etc.
• The company needs this additional cash flow quickly, which means traditional lending channels are not an option.
• The company wants to achieve larger profits by taking larger orders.

Learn More

If you would like to learn more about purchase order financing to find out if it’s a good fit for your business, please contact a Far West Capital representative today. Contact information

This entry was posted on Tuesday, July 17th, 2007 and is filed under Finance Tips.