Purchase order funding (also referred as PO financing) is a great way for companies to generate additional cash without taking on new debt or going through the often long and rigorous process of applying for a credit line through traditional lending institutions. Before you begin working with any PO funding company, make sure you thoroughly review their qualifications and get a detailed explanation of what you can expect from the process. During your review, here are three things your potential purchase order funding company shouldn’t say—if they do, consider it a red flag and think about working with someone else.
1) “We just opened, and you are our first client.”
While every company has to start somewhere, when it comes to large transactions and obtaining funding for your purchase orders, you want to work with a company that has an established reputation as a quality financing company. Working with a company that hasn’t been in business for long opens you up to risks that they might not have the cash available to fund your transactions, or they might not be around when you need them in the future. Universal Funding was established in 1998 by a team of business funding experts.
2) “There’s no need for a contract, we can figure out all the details later.”
One of the most important things you should do is get a contract in writing with your PO funding company. This document will outline all the important details of your relationship, including:
- Fees and rates for selling purchase orders
- Any minimum PO sales requirements
- Maximum amount you are able to access, if applicable
- Fees associated with additional services, such as customer credit checks or filing liens
- Any qualifications that your company, your suppliers, or your customers must meet in order to obtain funding
3) “We have never worked in your industry before.”
Purchase order financing requires that a company do some due diligence in determining the creditworthiness of your customers and suppliers, and in order to do that it’s best if they have worked in the industry before.
Don’t let lack of working capital hold you back from taking on big orders or going after a new client. When you have purchase orders in place, talk to Universal Funding about how you can use these things to generate cash for your business. Call us today or fill out our simple rate form to learn more.