Why Add a Partner when You Can Finance Your Large Orders?

business financing for large orders
Let it Go by W. Mustafeez/flickr

Developing and growing a small business is challenging. It’s especially difficult if you don’t have the capital to fill your orders. Many small businesses instinctively turn to partnerships or investors to help them launch a new product or build their business. But partnerships require a level of trust and commitment that may just give a small business another issue to worry about.

How do you come up with capital?

You have spent years coming up with the concept for your business. You have arranged and rearranged every detail. Your business plan is designed, and you know the ins-and-outs of every aspect of the business. Retailers want your product, and you are ready to supply it, but you need the funds for your first order. Your plans to put your profits back into the business take care of future cash flow issues, but where do you start if you do not have the capital to begin with?

Why not seek investors?

Are you ready to give up part ownership in the company that you now eat, sleep and breathe for on a daily basis? Partnering with investors puts a whole new spin on things, and it entails giving up some control. Depending on the amount of capital you require and the contract you sign with the partner, you may end up giving up more control than you ever imagined. Investors are in it for the money. That means that they want your business to grow and they want you to succeed, but they may not share your passion. Working with people who have a different vision than yours can be disconcerting at best; and it may not be what you initially intended.

What if you could just pay for what you needed?

purchase order financing
Photo by Meddy Garnet/flickr

You are prepared to maintain a certain cash flow; you just need a place to start. You are equipped to pay for overhead and routine necessities, but you just cannot put forth a sizeable sum for an initial large purchase. Purchase order financing gives you the means to pay your supplier for the products necessary to fulfill the order. Consider it an advance to cover the cost of materials. Usually paid directly to the supplier, the small business owner does not need to keep track of repayment or interest. When the client pays for the order, that payment usually goes directly to the financing company and the profit, minus any fees, goes to the business.

Can purchase order financing be arranged quickly?

When your customer commits to a large order, time is of the essence. You want to prove that you can fulfill the order efficiently and quickly to secure your client’s loyalty. Wrangling with lawyers and your potential investors to negotiate a deal can take time. So can the process of settling a bank loan. Purchase order funding can be obtained within days. Most financing companies can provide even faster service for future orders. The state of the economy does not usually affect the procurement of purchase order financing, which means the money will be there when you need it.

Loans involve scheduled payments and added interest””other details that may be more than a small business wants to deal with when launching the company. Purchase order financing provides a bridge between your large orders and the materials you need to purchase in order to fulfill those new sales. And this type of financing uses your customers reputation and good credit to qualify the deal, not yours.

Steven Brady is a financial consultant for medium to large corporations, and a content contributor for an online PO financing company. He says if you are lucky enough to qualify for government PO funding that purchase lenders will give you an even higher percentage of loan to value.