Purchase order financing, inventory & structured trade finance are solutions to boost your business cash flow.
By having the right financing in place, businesses can avoid cash-flow challenges, take advantage of their growth potential & increase profitability.
What is Purchase Order (PO) Financing?
Purchase Order Financing, also known as PO Financing, is a financial arrangement where a third-party lender provides funds to a company to fulfill a specific purchase order. It is primarily used by businesses that face cash flow constraints and lack the necessary funds to fulfill large orders especially as they are scaling as a business.
The lender advances the funds needed to cover the cost of purchasing the goods specified in the purchase order. Once the goods are delivered and the customer pays the invoice, the lender is repaid along with any agreed-upon fees and/or interest.
For example, at AmRock Financial we have a customer who manufactures electronic devices. The company received a large purchase order from a retailer to supply a large quantity of smartphones. However, the manufacturer lacked the necessary funds to purchase the required components and fulfill the order.
The company reached out to us to explore potential PO Financing options. We quickly assessed the viability of the purchase order and agreed to find a lender that would fund the manufacture of the smartphones. We brokered a deal with a PO financing lender who agreed to pay the suppliers directly for the raw materials, enabling the company to fulfill the order. Once the smartphones were delivered to the retailer and the invoice was paid, the retailer’s payment was directed to the PO lender directly. The lender deducted their fees and interest and transferred the remaining funds to the manufacturer.
How do Accounts Payable work?
Accounts Payables, often referred to as AP, represents the money a company owes to its suppliers or vendors for goods or services received on credit. It is a liability on the company’s balance sheet, reflecting the outstanding payments that need to be made to the suppliers within a specified timeframe.
For example, AmRock Financial worked with an importer of toys who received a shipment of toys from their regular Vendor. The Vendor required payment when the containers arrived at the US Port. The Importer was short on liquidity and was unable to pay the Vendor. We found an AP Lender who paid the Vendor. The Lender then extended the payment terms to the Importer for 90 days. AP Financing allowed the Importer to pay and buy the goods they needed and deliver them to his retail customer.
AP or PO financing is a financial tool that business owners can be used to increase sales or fulfill existing orders.
Contact us at AmRock Financial and we will gladly help you with the right financial solution for your business.