Why Startups Use PO Financing Instead of Bank Loans

One of the most exciting aspects of being a startup company is launching a product that is good, popular and highly profitable. In those situations, the phone calls begin coming in from major retailers or distributors wanting to sell your product. However, the biggest hurdle new companies must overcome is obtaining enough cash in order to fulfill a large purchase order. Many entrepreneurs, who are in this situation, must scramble to get capital to complete the transaction. This leaves them with a few options, such as securing a conventional loan or taking an alternative route with PO financing.

A bank loan is a suitable choice for business owners who have a long established relationship with a banking institution. In most instances, startups either don’t have this kind of relationship or have no relationship with a banker at all. This makes it difficult to secure traditional financing.

In addition, the approval process for a loan is lengthy. This is a drawback when you need a quick influx of funds. Most purchase orders have a 60 to 90 day deadline. It can take several weeks before a decision is made regarding your loan application. Also, there is no guarantee you will be approved. When it comes to business, time is money. The longer it takes to access the capital you need, the less time you have to fulfill a customer’s order.

A popular alternative to conventional loans is PO financing. With this funding solution, the finance company uses your purchase order as collateral. They, in turn, will pay the supplier or manufacturer. This way the product is made and delivered to your customer in a timely manner. This is a key benefit for business owners, because suppliers and manufacturers require money up front before they begin work on your product. With this finance option, you can avoid costly delays with the deliverables.

Unlike banks, there is no need to prove the financial strength of your company in order to get approval. The purchase order itself is good enough when you have a viable customer and a reliable supplier. Because of this, you can get funding within a couple of days to two weeks.

PO financing is ideal for startups and entrepreneurs who need to meet tight purchase order deadlines and lack the capital to complete the order. Simply put, it is a practical financial solution that provides you with the capital you need, when you need it, in order to grow your business.