Purchase Order Financing
Obtain Business Capital by Monetizing Pending Orders
Purchase Order Financing Defined
Purchase order financing is designed to help businesses fulfill large customer orders when faced with cash constraints. In this process, a lender provides funding to procure or manufacture goods based on confirmed purchase orders from a customer.
This type of financing is risky, since the lender, with limited operational or product knowledge, has to insert himself between the company and a manufacturer. After the finished goods are shipped to the customer, the lender uses invoices for products sold as collateral to collect the debt outstanding.
Benefits of Purchase Order Financing
Purchase Order Financing allows the business to cover the costs of manufacturing or purchasing of the goods necessary to fulfill a pending order. It helps a smaller enterprise fill large orders from new customers.
How Purchase Order Financing Can Work for Your Business
This type of financing is particularly valuable for companies experiencing rapid growth, seasonal fluctuations. It provides a practical solution to bridge the gap between cash required by the manufacturer and cash in the bank to secure a lucrative order, enabling businesses to capitalize on opportunities and fulfill customer demand.
Here’s where we can help:
Purchase Order Financing, while very useful to the right business, can be a complicated process to secure. With a significant financial outlay to go through the legal documents necessary to secure the loan, doing it incorrectly can be costly.
Your Deal Source has the partners and experience to navigate this process and help ensure a successful lending deal.
How do we get started?
Contact a YDS expert for a short no obligation free consultation call.
YDS will help you think through your options and introduce you to the best lending options for your company’s needs.
YDS can help you find Subject Matter Experts to help prepare you for the capital infusion, as well as improve your appeal to potential lenders.
YDS is there to support you through the application as you deal directly with lenders to apply and secure financing.
FAQ
Which lender will I be working with?
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It depends on a number of factors, such as the financial condition of your company, dollar amount needed and type of collateral used.
How much money can my company borrow?
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We have lenders that provide financing from a hundred thousand to ten million dollars.
What is the process to get a loan?
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During your initial consultation or when you fill in the required documents, your company's needs are outlined.
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YDS will help you determine which lender, what structure and a range of dollars you can qualify for.
What will happen to the fees I pay if I get turned down by the YDS lenders?
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In order to avoid surprises, we recommend working with our consultants and experts before you apply for a loan. Our vetted consultants can spot trouble and help you improve your chances of getting approved.
How are the lenders determining if I qualify for a loan?
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Lenders go through an extensive process of verifying the value of collateral, borrowers ability to repay the loans and owners background. Sometimes the lenders hire external experts to conduct appraisals or review documents.
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The lender will also look at the economic conditions and their internal process to make a final determination.
Are there any costs associated with this process?
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Use of external experts, like an appraiser or an attorney, are necessary to complete many transactions. Those professionals do charge fees for supporting the funding transactions. Those costs are disclosed upfront and can be controlled by the borrower.
What documents am I going to have to provide?
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To get funding, lenders require a certain set of documents. In general, all lenders ask for
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2 or 3 years of business income tax returns
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2 or 3 years of internal financial statements such as balance sheet, income statement and cash flow statements.
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Information about the business owners
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Information about the collateral provided
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Information about the use of capital
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Forecast for the next 2 years.
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Each lender and each borrower is unique and so a company specific document set may vary.
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We’ve created a data room where standard required documents can be stored ahead of time. We recommend that you prepare all required documents in advance. These documents are yours and only you can make them available to anyone else.