Is Purchase Order Financing the Same as Factoring?

purchase order financing, purchase order funding

Purchase order financing, purchase order funding, and factoring are often used interchangeably, but they are not all synonymous terms. So, what is the difference?

Factoring allows businesses to sell their accounts receivable to a factor at a discount. There are three parties involved: the seller, the debtor, and the factor. If your business engaged in factoring, you would sell your accounts receivable to the factoring company, and your customer (the debtor) would then pay the balance of their invoice to the factor.

Some of the benefits of factoring include:

  • It can come in the form of a cash advance, allowing you to meet current obligations.
  • By obtaining cash on an as-needed basis, it allows your firm to keep smaller ongoing cash balances and invest in further growth.
  • The risk of collecting receivables is transferred to the factor.
  • Your business can save resources by outsourcing collections.

Factoring is similar to PO financing in that they are both methods companies can use to obtain cash, and both are viable options for businesses that need funding immediately.

Purchase order financing can be a better option when a business needs cash to purchase raw materials, manufacture goods, and fulfill a specific purchase order. It differs from factoring because the financial institution involved in purchase order funding provides 100% of the financing needed for the cost of goods.  A new receivable is essentially being created rather than being bought for 70-85% of the price.

Some of the benefits PO financing include:

  • The financing company assumes the risk of paying your suppliers and collecting the invoice.
  • There is less wait time between paying suppliers and receiving payment from customers.
  • You can take on large orders that your company may not have otherwise had the capital to fund.
  • It is not a loan, and therefore, credit is not as heavily scrutinized in determining whether or not your company is approved.

Factoring and financing do have some similarities that cause confusion, but many businesses are simply unaware of the differences between the two. Before you take part in any form of financing, make sure to understand your options and consult a professional, like Meridian PO finance, to select the best one for you.

If you would like to learn more about your financing options, get in touch with Meridian today at www.meridianpofinance.com or 866-988-6868. Our team can work with your company to get fast, easy approval and provide funds in just a few days. Contact us today for more information!

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Meridian Series: How Resellers Can Benefit from Purchase Order Financing

Purchase order financing is a viable solution for resellers because it covers gaps in funding and helps increase their revenue. A reseller’s goal is to always be moving high quantities of product. Continuously achieving that objective requires working capital, which allows a reseller (or any company) to conduct its day-to-day operations, manage short-term debt, and pay for operational expenses.

A wholesaler’s business model often requires that suppliers be paid upon delivery. On the other hand, many customers insist on payment terms of 30-60 days. This interim period can put resellers in a pinch for cash, and unless the company has substantial reserves, it can cause financial stress. If your company does not have liquid assets that can be used as working capital, purchase order finance may be the solution.

Purchase Order Financing

Some of the benefits of purchase order financing include providing your business with the ability to:

  • Obtain quick, short-term capital. In a tight credit market, purchase order finance companies can quickly and efficiently provide the capital your company needs to fill an order.
  • Fulfill large purchase orders. If your company receives significant orders that call for more resources than normal, PO funding can offer the money needed to pay for supplies and deliver the product on time.
  • Increase your sales. By allowing a PO financing firm to pay your supplier and receive payment from the customer, you can close the sale every time and avoid financial stress between payment periods.
  • Grow your business. Filling larger orders more frequently ultimately helps move high volumes of product, grow your business, and make more money.

If you are a wholesaler that needs immediate funding and has found other forms of financing to be too restrictive or unsuccessful, contact Meridian PO finance today at www.meridianpofinance.com or 866-988-6868. We can often get pre-approval in less than 24 hours and provide the funds you need to fulfill your purchase orders in as little as three days!

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What is an Intercreditor Agreement for Purchase Order Financing?

When it comes to purchase order finance, you may be wondering if you can use your current financial institution in the process. Fortunately, this is possible with the help of an Intercreditor Agreement (ICA).

Purchase Order Finance Deal Using an ICAFor example, if you already factor your company invoices through an accounts receivable firm, you will still be able to do so while receiving purchase order financing from Meridian. Once you engage with Meridian, we will work with you to establish an ICA with your current financial partner. Then, we will provide the funds needed to cover the cost of your supplies or goods. Once product is delivered, your accounts receivable company will factor your customer and pay Meridian directly for their designated amount.

Here are some additional details about what ICAs are and how they work:

  • An ICA is an agreement between your PO funding company and any other creditors who will be involved in the financing process.
  • Within this agreement, liabilities and responsibilities of each party are defined so that the ICA can be used to handle any legal issues that may arise.
  • Similarly, lien positions and security interests are outlined within this agreement so that all parties know the order in which liens will be repaid and the rights of security interest holders to seize or sell assets.

How can an ICA benefit your business?

  • An ICA allows your business to use multiple financial institutions during the financing process without concerns or questions about the creditors’ roles and responsibilities. Having your current financial institution work with Meridian for purchase order finance will streamlines the process for all parties and ultimately create business growth.

If you need PO funding but still want to work with your current financial partner, contact Meridian at www.meridianpofinance.com or 866-988-6868 to find out how to get an ICA in place and receive the purchase order financing you need. Our firm can collaborate with your other financial intuitions, provide 100% of the capital needed, and work with your accounts receivable company to take care of invoicing.

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Meridian Series: How Bouncing Back Businesses Can Benefit from PO Financing

Purchase order financing is a smart option for businesses that are growing or recovering from a down cycle. Since the recession began, many companies have had to cut costs, including finding less expensive suppliers and letting employees go. Now, the economy is starting to bounce back, providing a sigh of relief and a positive outlook for businesses that have been affected.

Increasing revenue chart

The businesses that have seen the biggest improvement in recent years are primarily in the professional, science, and technical service industries. The health care and social sectors have experienced a positive upward trend as well. Real estate, rental/leasing businesses, and construction companies also are improving but have not completely recovered to their pre-recession levels.

Whether your company is growing fast and furiously or still getting back to normal from the economic downturn, PO financing can give you a significant advantage because it frees up cash flow to invest in the most important areas. If business is picking up and you need additional staff, purchase order financing can provide funds needed to hire more employees. New staff members can increase productivity and output, ultimately improving the bottom line. In addition, bringing on permanent employees instead of relying on temporary help can improve efficiency, retention, company culture, and revenue.

PO financing also is a valuable option for companies who are still struggling to recover. For example, if your business receives a large or unexpected order that you cannot fill, this funding can provide immediate capital to pay your suppliers, fulfill the order, and bring in much-needed revenue.

Whether you are bouncing back quickly or need assistance making ends meet, Meridian PO Finance can help solve your short-term funding needs and grow your business. If your company could benefit from this type of financing, contact us today at http://www.meridianpofinance.com or 866-988-6868. We look forward to being part of your business’ success!

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How to Qualify for Purchase Order Financing

Purchase order financing is an ideal funding option for a wide variety of industries, small businesses, and vendors who need money quickly to produce goods and services. Purchase order finance provides the funds you need to pay your suppliers upfront, buy materials, protect your cash flow, and increase your company’s revenue.

Another advantage of purchase order financing is that the approval process is often faster than it is for a traditional bank loan. Here are some of the qualifications that your company must meet to be approved:

  • Prove that you are able to fulfill the purchase order: You must be able to demonstrate to the lender that your business has previously completed this type of work successfully.
  • Prove that your customer is willing and able to pay: You will also need to show that your customer is able to pay your bill or is protected by a financial guarantee.
  • Charge the right margins: Due to variables like loan costs, it’s important to ensure that your business has high enough margins to qualify for purchase order finance. In order to calculate your gross profit margin, divide your expected gross profit by the total revenue you anticipate to receive. Then, get in touch with our team to find out if your margins are at an appropriate level.
  • Deal directly with your customer: Having middlemen between you and your customer can make the financing process convoluted. Minimize these obstacles to improve the likelihood of qualifying for PO financing.
  • Short payment terms: It’s best to get paid by your customer within 30-90 days of completing the work, so make sure to include these types of payment terms in your customer contracts.

If this type of financing is what your business has been looking for, contact Meridian PO Finance at http://www.meridianpofinance.com or 866-988-6868 to find out if you qualify. Our firm can help your business by providing 100% of the capital needed to successfully complete your purchase order, so get in touch with us today to start the process and receive the funding you need.

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Meridian Series: How Small Businesses Can Benefit from PO Financing

As a small business, you long for the moment when a large order arrives to boost your revenue and build your brand. But while these orders are a boon to business, they can also cause stress when your company does not have the resources to fulfill them. That’s where PO finance can be helpful.
PO Financing for the Aerospace Industry
For example, let’s imagine that you own a small business in the aerospace industry. You receive a significant order from a large government entity that could provide a huge inflow of cash for your company and make this its most successful year yet. However, you know that there is no way you can fill this order and deliver on time without help financing your vendors.

How can you get the resources you need quickly and easily? When time is of the essence, PO financing is the answer.

Here’s how PO finance works:

  • Your company receives a purchase order that requires financing to fulfill.
  • You present the purchase order(s) to Meridian PO Financing, and we verify it with the customer and supplier.
  • Once approved, Meridian provides the supplier with the needed funds to complete the order.
  • Your business delivers the goods requested to the customer.
  • The customer pays Meridian directly, and your account is settled with the remittance of funds, including interest fees, and any other fees required to complete the transaction.
  • Your company receives the profits and enjoys a boost in profitability.

If this type of financing is what your small business has been looking for, get in touch with Meridian at www.meridianpofinance.com or 866-988-6868 to receive quick and hassle-free funding. Your success is in our best interest. We look forward to establishing a partnership!

 
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How Purchase Order Funding Can Improve your Business’ Image

With a few clicks of the keys, Google can produce a listing of companies who specialize in purchase order funding totaling in the millions. Now faced with a sea of companies, how can you be sure which company to choose? What criteria should you turn to? In the short run, what you need is a company that can provide quick, short-term funding. In the long run, you need a company that can help improve your business’s image. This company is Meridian.

Now wait, how can Meridian improve your company’s image? After all, we are only assisting your company financially. Not true. Meridian can help you build loyalty, connections, and a global presence to new and repeat customers. Let’s take a look at these image boosters in an example.

Completing a purchase order finance deal

Let’s say your company lands the order of your dreams. You know your only shot at fulfilling this order is to get funding quickly. If you can’t get the funding, you can’t get the customer, and inevitably, they will take their business elsewhere and likely never return. With the ability to fund orders from $25,000 to many millions, Meridian can make a lot of dreams come true, and we can do it quickly and efficiently. In the eyes of your customer, you now become a possible repeat supplier. So, the next time your dream customer returns they can be certain that their order will be completed on time without any hassle thanks to purchase order finance.

We believe in the success of your business, which requires strong relationships and loyal customers. So, the next time a large client comes knocking and you need purchase order funding, give us a call or visit our website at www.meridianpofinance.com. We can provide pre-approval within 24 hours and funding in as little as 3 days!

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Meridian PO Finance Supplements Working Capital

As the premier alternative funding professionals, we here at Meridian PO Finance witness everyday how important it is for professionals to have a good understanding of key financial terms. Because whether your company is filling a large purchase order or just projecting this quarter’s earnings, you have to recognize the terminology to keep track of every penny.

If your company is interested in PO financing from Meridian in order to finance your operations and fill a large order, know the lingo and weigh all your options. Could your current assets bridge the cost? Or, could your total working capital cover the costs of production if a large order is placed? Alternately, is PO financing from Meridian your best possible source of funding?

meridian

Crunch the numbers!

Contrary to many professionals’ understanding, cash on hand is actually only a portion of a company’s working capital. To find the sum of all working capital, subtract current liabilities from current assets.

( Working capital = current assets  -  current liabilities )

By subtracting current liabilities (financial obligations and debts) from current assets (resources which could be converted into cash quickly, such as inventory and account receivable), we get a full picture of how much capital is currently held by your company, including projections of cash flow into the future. This figure is the best measure of a company’s liquidity, and can help you decide whether funding from Meridian PO Finance is your best business solution.

Tips to Avoid Non-Payment throughout Purchase Order Financing

If your company receives a purchase order but does not have the production capital to fill it, purchase order financing from companies like Meridian PO Finance can bridge the cost until the order is fulfilled and paid for. Our typical purchase order finance candidates seek alternative funding so their business can grow beyond limitations set by current cash flow or credit facilities, often establishing new client relationships and ultimately providing a solid platform for growth.

Companies in industries like technology, manufacturing, wholesale, transportation, and those contracted by the government use purchase order finance, and the majority of cases have positive experiences. And since most PO finance loans are approved and returned within a span of a few short months, our purchase order financing clients usually experience straightforward, speedy transactions. However, when supplying these goods or services on credit terms, the risk of non-payment by your customer may threaten your ability to pay back the loan. In order to eliminate all instances of non-payment by your business partners, adopt several strategic practices which simplify the payment process.

  • Include the credit terms on the invoice, reiterating to your customers exactly when payment is due. Don’t leave any room for ambiguity about the purchase terms.
  • After sending the invoice, follow up with your customer the next day. After that, check in regularly until the invoice is paid in full, asking about the quality and their satisfaction with your product.
  • If an invoice is still outstanding two months after the invoice date, assume there will be a problem collecting. Contact your customer’s payroll department, providing them all record of communication regarding the invoice.

At Meridian PO Finance, our best interest in in the success of your company. For more insight and advice on how to create a more prosperous business, check back frequently.

The 1-2-3 of PO Financing: The First Three Steps once You’ve Decided that PO Finance is Right for You

So you’ve decided that PO financing is the right move for you.

Maybe it’s because your company just received an exciting, brand new (and large) order. Maybe it’s because you were offered a government contract, one that could really help put your business on the map. Or maybe it’s because it’s the holiday season and your business’s products are simply flying off the shelves. No matter what the reason, you’ve thought about it. You’ve done your research. And now you’re ready to begin.

But…where exactly do you begin?

At Meridian PO Finance, we believe that the first few steps once you’ve made your decision should be easy ones. That’s why we’ve put together the 1-2-3 of PO financing – the quick guide to the first three steps to take once you’ve decided that PO financing is right for you.

1. Find the perfect partner: The first step is a crucial one. When looking to take advantage of all of the benefits that PO financing has for you, you’re going to need to start by finding a dependable, trustworthy PO financing company. With a financing partner that makes the pre-approval process as easy as possible, that offers a fast response time, and that guarantees a positive PO finance solution, your company will be on its way to success.

2. Make a game plan: Once you have a PO financing company you can trust, it’s time to think specifics. But you don’t have to do it alone. How quickly are you going to need funding? What’s the approval process like? Does it matter if your business is large or small? At Meridian, we make sure that all your questions are answered by trained and dependable PO finance professionals.

3. Get those contracts moving: By now, you’ve established a relationship with your trustworthy PO financing partner. You’ve had all your questions answered, you’ve created a game plan with our knowledgeable team of professionals, and you’re ready to take the last step. It’s time to get those contracts moving. Because you have a company you can depend on and a plan you can rely on, accepting those contracts and moving forward to gaining and maintaining financial security will be easier now than ever before.

To learn more about how PO financing can benefit your business, or to take that first step and speak with a Meridian professional representative, please visit our website: http://www.meridianpofinance.com/.