Business financing can be tricky, especially if you’re just starting out. However, one form of financing that has proven time and again to help small business owners in Canada succeed is Purchase Order Financing (POF). If you’re thinking about getting POF to help your business grow, here are some ways it can help you out today.
What is Purchase Order Financing?
Purchase Order Financing or POF is a form of debt financing that provides businesses with the necessary funds to pay for goods and services from suppliers. When a company needs to pay for goods or services before it receives payment from its customers, it can use POF to get the money it needs.
You may ask: how does purchase order financing work? The process is pretty simple—the company issues a purchase order to the supplier, and the supplier ships the goods. Once the company’s customers pay their invoices, the factoring company pays the supplier. The loan is secured by the purchase order, making it easier for businesses to receive financing.
In Canada, POF is a popular way for small businesses to obtain the necessary funding to grow their operations.
The Benefits of Purchase Order Financing
You may wonder: how does financing help a business? Here are the top 8 benefits of purchase order financing in Canada.
1. No Credit Checks
POF is a great option for businesses in Canada that may not be able to get traditional financing because there are no credit checks involved. This type of financing is based on the value of your purchase orders. So as long as you have a strong order book, you should be able to get the funding you need.
2. Quick Funding from Day 1
One of the main benefits of purchase order financing is that it can provide quick funding from day one. This can be extremely helpful for businesses that need to place large orders but don’t have the cash on hand to do so. With PO financing, businesses can get the funding they need to make their purchase and then repay the loan once they’ve received payment from their customer.
3. Minimal Paperwork
POF is a way for businesses to get the supplies and materials they need to run their company without having to spend time filling out paperwork. This is because the financer will typically only need a copy of the purchase order, invoice, and contract to provide funding. This can save businesses a lot of time and hassle when compared to other types of financing.
4. Guaranteed Payments on Invoices
When you have purchase order financing in place, you can rest assured that payments will be made on time and in full. This gives you peace of mind knowing that your business cash flow will always be positive, no matter what. You’ll also never be put in a position where you don’t have enough money to make it through to the next pay period.
Moreover, POF has lower interest rates. Typical interest rates are anywhere from 4%-10%. If this is lower than what you’d normally pay if you were to get a loan from a bank, it could save your company hundreds or even thousands of dollars per year.
5. All Kinds of Invoices Accepted
With purchase order financing, businesses in Canada can take advantage of factoring companies that will accept all kinds of invoices. This includes not only finished goods invoices but also work-in-progress invoices and service invoices.
POF also allows businesses to leverage their outstanding accounts receivable assets. Moreover, factoring is a fast process. Once the invoice has been submitted, the application process is simple and straightforward.
In most cases, it takes just a few days before funds are sent to the company’s bank account to allow them to pay off debtors more quickly than if they waited for their customers to pay them directly.
6. Competitive Interest Rates
By using purchase order financing, businesses in Canada can get competitive interest rates while still being able to take advantage of bulk discounts from suppliers. This is because the lender takes on the risk of non-payment by the customer, which means they can offer lower interest rates than other types of financing.
In addition, purchase order financing in Canada can help businesses get the cash they need to grow without having to go through the hassle of getting a loan from a bank.
7. Secure and Safe Way to Finance Your Business Expenses
One of the biggest benefits of purchase order financing is that it’s a secure way to finance your business expenses. With this type of financing, you’re working with a partner who’s committed to helping your business grow. You also don’t have to worry about putting your personal assets at risk if your business doesn’t succeed.
Also, POF can help you get started even if you don’t have a lot of money saved up. This type of financing can give you the breathing room you need to get your business off the ground.
8. Increase in Sales
For starters, businesses that use PO financing typically see an increase in sales. This is because PO financing allows businesses to take on new orders and grow their business without worrying about having the cash on hand to pay for the goods and services upfront.
Additionally, purchase order financing can help businesses improve their cash flow. This is because PO financing allows businesses to get paid for the goods and services they’ve already delivered, rather than waiting 30-60 days for those payments to come through.
Lastly, POF can be a great way for businesses to get started in importing and exporting goods.
Get the Funds You Need to Grow Your Business in Canada
Purchase order financing can be a helpful way for businesses in Canada to get the supplies and products they need to grow and succeed. It can provide quick and easy access to the money you need, without the hassle of traditional lending. If you’re looking to expand your business, consider using purchase order financing as a way to help you achieve your goals.