Purchase Order Finance
Maximize Your Financial Plan
What do you do when you get a big customer order and you don't have the money to pay supplier? Well, get in touch with Jigsaw, of course.
We often hear from business owners who have great customer relationships, but whose success has led to an inflow of orders for which they now need additional investment capital.
Purchase order finance, sometimes called trade finance, will allow you to increase your turnover and increase your profits. The magic of purchase order finance is this: finance is based primarily on the strength of your end buyer. Your own business financial picture is taken into account, of course, but your experience and the customer's credit profile are of much higher relative importance.
Depending on the deal's profit margins, you may need very little of your own cash to do the deal. It is possible that almost all of the supplier's cost will be covered by the finance group.
PO Finance Process
Once there is a confirmed purchase order, funders will determine how much of the order they will finance. Then if the supplier is overseas, they will likely open a letter of credit in favor of the supplier.
Sometimes if the supplier is domestic, different finance terms can be arranged for the supplier.
At the point that the goods have been delivered to the customer and you can invoice your customer for the goods. This is an important step, because you can now convert purchase order finance into invoice finance. PO finance is perceived as a riskier form of financing, so the funder will charge more for that part of the financing. As a result, it is always in your interest as the business operator to complete the PO portion of the finance quickly.
We often see cases where Chinese suppliers take 90 days to ship the order. PO finance is based on the amount of time the supplier's LC has to be open, and it can get very expensive for long lead time orders.
This is another place where we can add value to your business operations. We have a money-saving strategy for financing long lead time orders and protecting your profit margins.