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How a Small Business Can Grow Using PO Financing

Finance

Recent statistics point to the importance of the small-business startup for keeping the economy stable and healthy. More than half a million new businesses start each year in the United States alone. However, statistics also show that 50 percent of new businesses will close within five years. The primary reason that new businesses fail is a lack of adequate cash flow.

How a Small Business Can Grow Using PO Financing image how small business can grow

Small businesses that survive have planned for various future funding problems. These businesses also have developed a business plan that includes strategies to quickly raise money when new opportunities present themselves. Increasingly, small businesses that want to influence the marketplace are opting to partner with factoring companies in PO (purchase order) financing deals to raise capital on short notice. When considering how PO financing can support your business expansion efforts, it’s helpful to learn how companies in different industries have grown, thanks to this financing tool.

What Is PO Financing and Who Can Use It?

Because PO financing is actually designed for use by small businesses that have fewer cash reserves, understanding this financing tool can give you leverage over your competitors. PO financing (also called “PO funding”) is a newer financing option that allows business owners to raise capital without dipping into the company’s reserves. Because PO finance is a flexible commercial funding option, small businesses from every industry can benefit. Manufacturing, medical, financial, technology, distribution, import-export and wholesalers participate in PO financing with great success.

Case Study From Import-Export and Distribution

A young import-export distribution company hired a consultant to enhance its Web presence. Suddenly, the company began to receive larger orders; however, it did not have the sufficient reserves to purchase the inventory needed to fill these orders. Through PO funding, though, the company was able to leverage the value of its future accounts receivable and purchase sufficient inventory to fill the new orders. Through this cash infusion, the company has matured into a more profitable, as well as more stable, business.

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Case Study From Medical Manufacturing

A medical manufacturing company received an opportunity to fulfill a large order for a new national client. However, the company lacked the on-hand cash reserves to purchase sufficient inventory to fulfill the new order. It was suggested to the company that PO financing could be the solution to its problem. The company was able to arrange for PO funding, based on the future value of the profit from the new large order. Once the initial contract was fulfilled, the medical manufacturing company was profitable enough to build up its inventory and seek other large orders. Today, it is a regionally successful company with the goal to grow its client base nationwide.

PO Financing Does Work

These companies represent just a handful of the industries that have improved profitability and competitive position through strategic use of PO financing. Because this type of financing works with small companies at key growth moments in the business life cycle, PO financing has become a faster, easier and more viable financing option for many small-business entrepreneurs today. In situations where a small business might ordinarily be forced to turn down an opportunity, PO financing is there to share the risk and the success. If you are ready to grow your small business, consider how PO financing can help you to achieve your goals.

Comments on this Article: 6

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  1. Sirangi, you are right on with this article. I started an electronics business in 2008 and there was not a penny to be found from any bank. So I sought alternative financing and used PO Financing to fund my growing orders. It allowed me to grow my business from small order for 10 digital frames to orders from Big Box Retailers for 25,000 digital frames. I liked PO financing so much I joined with the company that helped to be a BDO for RMP Trade Credit. If anyone has ANY questions about how it works or how to get started please contact me.

  2. Sirangi – great article. PO financing is a great tool for all small to medium sized companies who are cask strapped and have orders to fulfill without losing any equity.As a former garment and textile importer and commercial loan officer, I am able to relate to the prospect and provide them the guidance that they need. Brookridge Funding has been around over 18 years and is considered a leading providor of PO financing in the US and Canada. Longevity does count for something – experience, reputable and professionalism. If you have any questions, please feel free to contact me.

  3. Dilip says:

    Hi. Sirangi… I liked the article & browsed a lot… can you please suggest me a good PO Financing Firm that is located in Bangalore or in India.. I am a Distributor by profession & get certain orders instantly wherein my needs are not catered immediately by the banks. I usually search for private investors. If you can suggest me few firms who does this financing. It would be of grate help. Thanks for the article again

  4. Bryce says:

    I’m a small business owner who has never once used PO financing. Now, I certainly will consider it.

  5. Harmon says:

    I found those case studies you cited throughout your article both highly interesting and useful. In fact, I’d even say they were inspiring to me, as a business owner.

  6. PBCC says:

    Purchase order financing has become a faster, easier and more viable option for many small-business entrepreneurs today. In situations where your business might ordinarily be forced to turn down an order due to a lack of funding

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