If you need some quick money to pay for your purchases then try considering purchase order financing option. It is a better way to generate ready cash so that you can pay for those purchases and keep your business on track. It provide you with easy and quick capital in the conditions when the financial conditions of the business are not appropriate or the money is locked up in some deposits so that you don't have the appropriate cash in hand to pay to your sellers.
As you receive the order from your client you just visit the financing company for the support. The company will pay up to 100% of the cost to your supplier by the letter of credit. The letter ensures that once the goods are delivered in time and proper conditions the payment will be made. The goods get delivered and the invoices are settled. The whole transaction is completed as soon as your customer pays their invoices. This is how sales financing works. The payment margin may differ from one financial company to the other.
It mainly depends upon the credibility of your client. If the client is a government institution or a reputated company with big market share or strong presence in the market then the companies readily finance the order. But if the client is a new entrant in the market the companies have their terms and conditions which you have to fulfill. In this condition they may finance up to 70%-75% of the sales value.
The whole process is simple and gets completed within few days. There are few companies giving you this service. You thus have to search them in the financial market and find out one. Such financing is generally available with the companies providing factoring services.
This mode of financing is not entered in the debts and thus this becomes its second advantage. All you need to do is get an order from the client, then move to the reliable supplier to complete the order for your client and then finally hunt for the company giving such funds.
Besides the reliability of your client, the financial companies also look into the profit your company earns, the reliability of your company, the goods in which you are dealing and the size of the sale. Some financers also give a minimum and maximum limit in which your order should lie.
Thus the mode is an easy way to settle your deal with your client and make your business grow in size.
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