What is purchase order funding?

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In Inventory Management, you probably has heard of Purchase Order. Together with other inventory management trends such as Order Management, Purchase Order management is one keystone to help the store owners to maintain and manage their warehouse system.

Purchase order funding is a funding option for business that need cash to fill single or multiple customer orders. In many businesses cash flow problems exist. There will be times where there is simply not enough money available to cover the costs of doing business. As a result, there may be an order from a client that isn’t able to be fulfilled due to a lack of cash. A company may not be able to afford the supplies necessary to meet the client’s particular needs. Having to turn the order down would obviously mean loss of revenue and perhaps even a tarnished reputation.

Who will use Purchase Order funding?

Purchase Order funding is designed for growing businesses that want to fulfill large orders. They have little access to working capital and/or poor cash flow. The types of businesses that usually qualify include:

Manufacturer

Distributor

Wholesaler/reseller

Importer/exporter

Whether a startup or an established business, Purchase order funding will listen to your story and work a program to meet your needs. Unlike other lenders, Purchase Order funding will fund an entrepreneur’s first transaction. As a matter of fact, 50% of the new clients receive funding for their first transaction.

What is Purchase Order funding?

Purchase order funding involves one company paying the supplier of another company, for goods that have been ordered to fulfill a job for a customer. This is an advance and may not be for the entire amount of the supplies, but it will cover a large portion of it. In some cases, companies can qualify for 100% funding.

The purchase order funding company will then collect the invoice from the end customer and make their money by charging the company in need of funds various fees. These fees are taken out of the collected invoice. The remaining amount is returned to the purchase order funding company. A second option is for the purchase order funding company to open up a line of credit with the supplier. The line of credit will be opened in their name and backed by them. This allows businesses with poor credit or few assets to get the supplies that they need.

The advantages of Purchase Order funding

Purchase order funding can be quite advantageous. It is pretty easy to qualify for and much easier than bank funding. Also, it does not require a company to have stellar credit. What is important is the credit worthiness of the client who has created the purchase order. If this person has a strong credit history, then purchase order funding is pretty easy. Many companies will require that the client be a commercial one or a government agency. There might also be other requirements. For example, the company may need to be profitable or earn so much in sales each month. The requirements will likely differ based on the financier.

Since Magento is a trending ecommerce platform, building Inventory in Magento as well as Purchase Order Management is crucial.

You may want to know about: Best 16 features to make Magento the main ecommerce platform.

So you need the proper tool to manage your purchase order in Magento, and we will suggest you the Magento Purchase Order extension so you will not be left behind with your competitor.

Stay tune with Magentone for more interesting blog posts.

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