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Bank-lending regulations continue to tighten as the U.S. economy struggles to emerge from its ongoing slump. However, creative business owners have found ways to prosper and grow in spite of economic challenges. Purchase order (PO) funding (also called purchase order financing) is a fast and flexible, small-business–friendly option that sources such as The New York Times Small Business Guidehave endorsed in recent years. PO funding offers many attractive advantages over traditional bank loans.

PO Funding Defined

PO financing provides qualifying businesses a line of credit based on the value of accounts receivable, raw materials or pending purchase orders. Qualifications may vary by company or industry but are often as simple as showing proof of business viability and a valid pending purchase order. For businesses that can meet these requirements, PO funding is typically fast and red-tape free. With purchase order funding, a business can receive up to 100 percent of the value of future accounts receivables. This infusion of money facilitates growth by funding the capacity for that business to accept larger purchase orders.

Competing for Bank Loans

Banks receive new loan requests daily. Sheer demand allows banks to be selective about approving loans. Banks also tend to favor established businesses that can meet their pre-qualification criteria. The bank-lending process tends to be lengthy, which hampers a business owner’s ability to seize new growth opportunities. Perhaps most restrictive is the tendency bank lenders have to grant only partial loan amounts. Some businesses can afford to miss an opportunity while waiting on the bank’s decision, but most cannot. Finally, pre-existing banker-to-business relationships often are in favor of established customers when loan money is scarce. Even a promising, fast-growing new business can expect to lose out to a known loan applicant in this situation.

Consider PO Funding Instead

Today’s lending marketplace offers alternatives to bank loans for businesses that need lines of credit quickly. Companies work with various industries from manufacturing to wholesale, distribution to industrial, import-export to medical, technology to real estate. For companies of any size that can produce proof such as letters of credit, purchase orders, accounts receivable, raw materials, deposits, pending contracts and similar project orders or letters of guarantee, PO funding approval can often be quickly secured for financing rates as low as 1.5 to 3 percent.

Benefit to All

Approximately half of all new business startups close their doors in the first five years. Many businesses fail because of a lack of funding options. Because factoring companies offer PO funding lines of credit based on proof of pre-existing business opportunity, establishing a trust-based foundation for present and future financing is easy and fast. Factoring companies, businesses and the economy benefit from a lending source that builds new relationships based on proof of intent to do business and profit.

Get Started Today

If you are ready to apply for purchase order funding, the first step is to choose your funding partner. An online search can help you select your PO funding partner. Next, pay attention to any minimum pre-qualifications criteria. Because criteria can vary by company, it is best to research at least two or three different funding partners before selecting one. You want to look for a funding partner that is dependable and responsive with an established reputation. You should also search online to see what other customers say about working with that funding partner. Next, call each company on your list and ask questions. You want to select a funding partner that answers each question to your satisfaction. Finally, you can select a funding partner and assemble any required documentation for the application process. Once you have submitted your PO funding application, it is common to receive your funding in one to two weeks.

About the Author: Raul Esqueda is founder and CEO of 1st Commercial Credit LLC in Austin, Texas. Raul has experience funding businesses of all industries and sizes in the United States, United Kingdom and Canada and has written many articles about purchase order finance, factoring and asset-based lending.

2 Responses so far.

  1. Offshore Company says:

    Good info once again!
    Thanks. ;)

  2. getting a quick loan says:

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    Money and freedom is the best way to change, may you be rich and continue to guide other people.


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