Business line of credit for small business

How can purchase order financing improve cash flow for businesses?

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As a business owner, I’m sure you know what it’s like to keep up with customer’s needs for orders of your products.

What if your company is new and not ready to begin landing major orders that need to be fulfilled, or your business is growing rapidly, and new customers begin to place orders on top of existing customers? Better yet, what if you aren’t anticipating the demand of existing customers increasing, which increases the demand for supply?

Using a valuable financing tool such as Purchase Order Financing, business owners can keep up with their customer’s demands at their own pace while maintaining capital for other areas of their business.

To start, what is Purchase Order Financing and how can businesses benefit from this tool?

It is an option for business owners who need more supplies to fulfill products for their purchase orders. Therefore, a financing company will directly pay a supplier for goods manufactured to resell or distribute to customers. This allows businesses to finance the cost of supplies needed to complete a purchase order, consequently freeing up capital.

Although, there are a lot of other costs associated with fulfilling a purchase order such as workers, delivery, soft costs, etc. It should be noted that the funds provided as part of Purchase Order Financing. It can only be used for the purchase of goods required to produce the final product. However, be aware that there are certain qualifications for it.

Let’s look at some of the benefits of purchase-order-financing:

Benefits of Purchase Order Financing

It can help improve cash flow or increase revenue for businesses in the following ways:

Frees Up the Amount of Cash Available

Purchase Order Financing provides a business owner with the ability to expand his or her business in other areas. As purchase orders for products are being fulfilled effectively. Companies opting for it can thus use their cash on other aspects such as advertising, paying salaries and rent.

Increased Sales

Purchase Order Financing can help you build a stable relationship with your customers and suppliers. Since it helps you meet your orders, it can potentially increase your revenue in sales. Being able to fulfill orders also helps improve your reputation in the market and the likelihood of new and repeat customers increases.

Helps Startup Businesses

As customer orders are growing, a business owner needs to fulfill each demand. If your business is new, it may be difficult to qualify for loans. So, if you happen to have a reputable and trusted customer to buy your products, this makes qualifying for Purchase Order Financing much easier due to Purchase-Order-Financing being more reliant on reputable customers than the reputation of your new business. For example, if you have a well-known retailer such as Target or Bed Bath and Beyond as a customer, this increases your chances to qualify for it. This would be highly beneficial for a new business to expanding without needing a loan.

Let’s look at some of the qualifications of purchase-order-financing:

Nick Blott is a representative from AmeriDream Capital. AmeriDream Capital is a full-service business financing firm catering to small to mid-sized business all over the world. A representative could help guide and assist you if needed. If you have any detailed questions, please feel free to visit for additional information.

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