Purchase Order Funding - Learn How To Finance Your Sales

Are you selling items or services to the proverbial big box retailers

? To companies like Wal-Mart, Costco, Sam's Club, Lowe's, The Home Depot and others? There are lots of advantages to selling to these businesses. For beginners, they have incredible purchasing power and can place large orders. They are able to truly assist your company develop incredibly and take it to the next level.

On the other hand, they also have amazing clout and negotiating power. That implies that they can, and often decide to negotiate payment terms to their advantage. It isn't unusual for big box retailers to pay their invoices in 30 to 60 days. This produces two distinct types of conditions, depending on your financial situation:

You cannot afford to wait to get paid

If your greatest concern is that you can't wait to get paid by your big box retail clients, the solution might be to factor your invoices. Invoice factoring is really a form of financing wherein you sell your invoices to a factoring company who pays you for them. They wait to get paid while you're paid immediately.

You need money to pay your suppliers

If your big box retailer client places an order that is too large for your current financial issue, your best option is to use purchase order finance. This kind of financing is also provided by a factoring company, but covers all your supplier payments. It enables you to finish the order and make the sale. Like factoring, the transaction is settled as soon as the client pays the invoice.

Which one should you use?

Both factoring and purchase order financing can be really useful. Factoring tends to cost much less, so as a rule of thumb you should try it first. Nevertheless, if you need more financing than what factoring can offer, then you ought to add purchase order financing to the solution portfolio.

Both solutions can be quite affordable though costs will rely on your financing volume. Much like regular retailers, factoring companies give volume discounts and charge much less if you use them frequently. Ideally you are better off using factoring as a recurring financing tool while deploying purchase order financing on a "as needed basis" to help with the big orders.

Purchase Order Funding

by: Kelly Bean

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