How does PO financing work?

Imagine receiving a PO from your best customer for goods that you don’t have in stock. You need to either manufacture the product or purchase it from someone else. But you don’t have the money to do either. What are you going to do? If you decline to take on the new order, you risk your customer finding a new vendor, which could lose a long term earning opportunity for your company.

Universal Funding’s solution to this cash flow dilemma is purchase order financing. PO financing is a short-term financing method used to cover the cost of manufacturing or purchasing goods that have been pre-sold through a purchase order. Here is an outline of how the process works:

STEP ONE: Your customer places a large order with you and provides you with a purchase order.
STEP TWO: The purchase order becomes your collateral and we advance you the funds – up to 100% of your supplier expenses.
STEP THREE: We issue a Letter of Credit or other form of guaranteed payment directly to your supplier.
STEP FOUR: The supplier ships the goods you are reselling to your customer, who, upon receipt, makes payment to Universal Funding.
STEP FIVE: We remit payment to you less our minor financing fee.

Now, the order has been fulfilled, without taking on more debt and you earn the profits instead of having to turn down the business. The advantage of PO financing is that it’s much faster than traditional financing and it’s your customer’s credit worthiness that is considered, not yours.
Additionally, PO financing is not new to the business world. It’s a very commonly used tool for many businesses in a variety of industries.

To learn more about putting either purchase order financing or invoice factoring to work for your company, request a free consultation with one of Universal Funding’s Business Development specialists today.


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