When many business owners think about financing, they imagine complex term loans with strict requirements. In the past, those types of loans may have been the only ones available for commercial needs. But times have changed and modern lenders are adapting to the needs of every kind of business like never before.

Whether you run a large company with hundreds of employees or a small family business, there are alternative financing options that provide amazing benefits and few risks. Purchase order financing is one type of alternative funding that adapts well to a wide variety of business essentials, including expansion and cash flow needs.

What Is Purchase Order Financing?

Each lender has its own specific form of PO financing, but generally the process works by turning your company’s received purchase orders into funding that is approved instantly. This process begins when one of your customers submits a purchase order. You send this document to the lending agency, which then orders the items from your preferred suppliers and transfers funds. Finally, the lender ensures that the order is delivered complete and on time to your client.

All of these steps generally happen via an online app or a digital system. For many businesses, this arrangement is similar to having a third party take care of logistics for your company. You don’t have to worry about inventory management or order fulfillment since everything is handled for you.

How Many Purchase Orders Do You Have To Submit?

The terms of purchase order financing agreements may vary, but usually you have the freedom to decide which purchase orders you want to submit. If you want to handle most of the orders yourself, that’s OK. In that case, you would simply take advantage of PO financing for orders that go beyond your normal financial capabilities.

When Is PO Financing Advantageous?

There are many situations when you’ll be happy to have PO financing by your side. An important client may request an unusually large order that you can’t fulfill with what you have in inventory. Should you wait several weeks to deliver the order? A better option is to let your purchase order finance partner handle things. That way the client receives the entire order in as little time as possible.

Another situation where PO financing is helpful is when you want to expand operations into new territories. It’s hard to predict how much inventory you need to have on hand, and you may lack the working capital needed for everything. By using purchase orders to drive financing, you’re ready to provide the best customer service to prospective clients.