How to Avoid Debt with Purchase Order Financing
One of the ways that you can secure extra funds for your business without going into debt is with purchase order financing. Not only can this help you pay your bills, it is not actually a loan. This means that you can give your business a boost without dinging your credit score or going into debt. The process for this type of financing can seem confusing and intimidating, however, there are companies out there designed to help you understand it and get the funds that you need.
Not a Loan
Purchase order financing helps you get the money you need to fill your customers’ orders before you get paid. Instead of applying for a bank loan, you are verifying your purchase orders with the supplier and a third-party to get everything done in a timely manner. This type of financing is designed to help you fill your customer’s orders without having to put them on hold until you get paid for the ones you have already finished. In some industries, this can be a significant gap of up to ninety days and can cause an insurmountable backlog in your orders.
Pay Your Bills
The second way that PO financing can help you avoid debt is by helping you pay your bills in-full and on-time. This can keep you in good standing with your creditors as well as your vendors, employees and landlord to keep you out of collections. Being able to find a way to pay your bills without going into debt every slow season can go a long way to improving your cash flow and business credit score, two things that can help you get out of debt and stay that way.
With PO financing, you are paying your vendors with a type of advance. This can help you keep working between your invoices being paid and can help you improve your cash flow. When your orders have to stop and stall in order for you to wait out the invoice payment dates, it can stop and stall your company’s growth and turn customers away. This can put you further in debt to your regular bills and require gap loans which will impact your credit and your bottom-line.
Purchase order financing can help you avoid debt because it is not a loan that your company has to apply for and pay back. This means that it is easier to pay your bills without going into debt to do so. This financing method can keep you working between payments on your projects and keep the lights on for longer.