An Easier Way To Increase Your Cash Flow
If your business struggles to obtain financing for presold or finished goods, you’re not alone. At Aspen Commercial Lending, we recognized a need for loans for these types of products and vowed to offer a solution, which we now do via the form of purchase order financing. If you need money to pay your suppliers and increase your output, we’re ready to help with any purchase order financing you might need.
We’re Ready To Help Regardless of Your Situation
Our financing team at Aspen Commercial Lending is skilled in the production of loans for works in progress and in obtaining lines of credit for domestic trade purchases and import and export transactions. Whether your business is a startup, lacks access to capital or experiences poor cashflow, we’re willing and able to help.
The Advantages of Purchase Order Financing
There are several benefits of turning to purchase order financing when you need to increase your cash flow. Some of the more prominent benefits are as follows:
- Increase your output, fulfill larger customer orders and boost your profits.
- Grow your business without having to sacrifice equity or increase bank debt.
- Expand your market share.
- Make on-time customer deliveries.
- Obtain faster and more flexible funding.
What is the Difference Between Purchase Order Factoring and Purchase Order Financing?
there is a difference between purchase order financing and purchase order factoring, although both are financial services used by businesses to manage cash flow and fund operations. Here’s a breakdown of each:
Purchase Order Financing:
- Definition and Use: Purchase order financing is a type of funding where a third-party company provides capital to a business to pay suppliers for a confirmed purchase order. This financing is typically used by businesses that need funds to fulfill large orders but lack the necessary capital to produce or procure the goods.
- Process: When a business receives a large order from a customer but doesn’t have the funds to fulfill it, a purchase order financing company pays the supplier directly. This enables the supplier to produce and deliver the goods to the customer.
- Repayment: Once the goods are delivered and the customer pays for the order, the business repays the financing company, usually with an agreed-upon fee or interest.
Purchase Order Factoring:
- Definition and Use: Purchase order factoring, often simply referred to as factoring, involves a business selling its invoices or receivables at a discount to a third-party company, known as a factor. It’s a way for businesses to get immediate cash for the invoices they issue.
- Process: In this arrangement, the factor advances a percentage of the invoice value to the business upfront. This advance provides immediate working capital to the business, helping manage cash flow, especially for longer invoice payment terms.
- Repayment and Fees: When the customer pays the invoice, the factor collects the payment and then gives the remaining balance to the business, minus a fee for the service. The fee is typically a percentage of the invoice value.
- Purpose: Purchase order financing is used to fund the procurement or production of goods before an order is fulfilled, while factoring is used to finance accounts receivable after the order is completed and invoiced.
- Involvement of Third Party: In purchase order financing, the finance company interacts directly with the supplier, whereas in factoring, the interaction is mainly between the business and the factor.
- Timing: Purchase order financing is about securing funds to complete an order, while factoring is about speeding up cash flow after an order is completed.
- Risk and Control: With purchase order financing, the financier assumes significant risk as they pay suppliers upfront, whereas in factoring, the risk is generally lower as the product or service has already been delivered.
In essence, purchase order financing helps businesses fulfill large orders by providing upfront capital to produce or procure goods, while purchase order factoring helps businesses improve cash flow by advancing funds based on completed sales reflected in invoices.
Contact Us Today
If you’re ready to help your business reach its potential, contact Aspen Commercial Lending today regarding purchase order financing. You can reach us by phone or email.