Factoring Account Receivables Vs Purchase Order Financing
There are several financing options available to small and medium sized businesses that help limit the financial burden they can acquire. Businesses may opt to have accounts receivables financing (AR factoring) or (PO) purchase order financing.
The key to determining which of these choices is best for your establishment, is to know how each one works in concert with your current business environment. Nevertheless, it all boils down to giving you a steady cash flow to help you to thrive in your market. This will help fund your operational expenses and other hard costs associated with your business needs.
How Does Purchase Order Financing Work?
Do you need capital for raw materials, inputs and goods for resale, packaging and the like to fulfill purchase orders? PO financing may be the instrument you need. Your purchase order finance firm pays you up to 100% up-front. You can use the funds for the materials you are going to need to comply with the purchase order requested by your customer. This is secured by a verified PO contract.
To qualify, your customer and supplier should:
- Be creditworthy
- Be a profit margin of at least 15 percent
- The existence of a U.S. Government Entity or a viable business customer
- The sales of tangible goods.
Once financing is approved, the lending institution pays the percentage of the total order value. The company then produces and ships the order. When the customer pays, the factor is also paid including interest. The remaining balance of said sales is remitted back to the company.
- It’s not really a loan
- Suppliers are paid
- Big orders are fulfilled
- Collection is included
- A-1 credit not required
This type of financing will help grow your business exponentially without putting any additional financial burden on you. The more qualified purchase orders you get, the more financial support you will receive from Meridian PO Finance.
How Does Accounts Receivables Factoring Work?
Do you have outstanding invoices or receivables but in need of quick cash? Account receivable financing may be your alternative funding solution. It is the selling of your receivables at a discount to a financing factor, which assumes the risk and collection, not you.
To qualify, your customer should be creditworthy; the invoices involved must be due in 90 days or less, the existence of a government or business customers, and sales of goods or services.
- No more collection on your part
- Available working capital on demand
- Quick and easy financing
- Limit the risk on your business
With working capital available at your disposal by virtue of those invoices, you can manage multiple expenses that aren’t always easy to finance such as equipment. The equipment purchased will be an added asset to your business, which will translate into additional income generation. On the occasion that you have a seasonal sales dip or rough economic downturn, the accounts receivables may also be a source of working capital.
Mixing Both Financing Options for Better Gains
In most instances, a business will be eligible for both financing options. It is best to combine both at a given period when possible. Imagine all the working capital that can be available to your business if both PO financing and AR factoring are taken advantage of.
On one hand, your business can continue on supplying goods to the customer without the need to spend money up-front for its production. On the other hand, you free yourself from unpaid orders. You can reduce the stress that comes with unpaid invoices and pass the risk to a financing company that will assume the collection?
Meridian PO Finance is Here to Help Businesses Across America Thrive
For your PO financing and AR factoring needs, Meridian PO Finance will readily extend assistance. We have undertaken to allocate up to $10 million in financing per business entity to cater to asset-based financing. The amount will provide the funding most businesses require to work on big projects geared towards business growth and market sustainability.
The goal is to assist promising small businesses invade their competitive market and participate in the big arenas. For AR factoring, we provide up to 80% of the value of the invoice. For purchase order finance, we provide up to 100% of purchase order amount.
Call us for Fast & Easy Approvals at 866-988-6868