Purchase Order Financing – The Secret Weapon of Small Business

Purchase order financing is “transactional financing” where a purchase order lender finances the production of hard goods for an otherwise undercapitalized business.

The current restricted credit environment has made things very difficult for small and mid-sized businesses – especially those who sell goods to larger companies, big box retailers and government agencies.

The problem is not getting the business, but financing the production of goods to be delivered.

Purchase order financing is a very good solution for this problem because the PO lender uses a firm purchase order from a credit worthy customer as collateral to allow a small business to deliver goods to a large company or government agency.  i.e. it allows the “little guys” to compete with the “big guys.”

Of course, the cost is higher than a traditional bank loan or line, but the quick and simple nature of PO financing combined with the ability of the business owner to sidestep most of the usual “bank financing hoops” (as well as the time saved by not having to prove to a bank that you are “worthy”) more than make up for the cost.