Alternative Funding Options

In the past decade, banks have become more and more strict about who they’re willing to lend their money to. While their caution is understandable, this probably means you, like thousands of other owners out there, are going to have trouble getting your small business the financial support needed to help it succeed. Fortunately, traditional loans aren’t the only way to go. In fact, there are several different alternative funding options out there. One of the methods that many business owners have found successful is purchase order financing, which provides businesses like yours with a much-needed cash flow boost without the risk that other financing options pose.


The Basics


Purchase order financing – also known as factoring for some – offers you the ability to make money you’ve already earned more quickly. If your business has good credit and completes a decent amount of sales or orders, you may be able to work with a factoring company. These companies will offer you an advance payment on your unpaid invoices, which they will collect from you customers later on. This means you’re getting your cash weeks or even months before you might have otherwise expected it.


The Benefits


The big benefit of purchase order financing is that you get your money sooner. Having your money on hand right away has several benefits itself, such as allowing you to make payroll, helping you avoid any cash struggles that might arise, and allowing you to take on big, valuable projects at a moment’s notice. These are all things you might not otherwise be able to do while waiting for weeks or months for your customers to pay their bill.


Furthermore, this is also a non-debt way of getting the money needed to help your business move forward. During this arrangement, you aren’t borrowing money, simply receiving an advance on the cash that your business has already earned. Therefore, none of your profits will be tied up in monthly repayments in the future, leaving you free to focus on growth and development.


The Drawbacks


Perhaps the only drawback of using PO financing for your business is that, at the end of the day, you’ll be receiving slightly less cash than you would have by waiting. The factoring company you work with will take a small percentage of the advanced money during the arrangement. This is how the factoring companies turn a profit.


When it comes to alternative funding options, purchase order financing might just be the perfect solution. Keep your business on top with this simple, debt-free arrangement.

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