Sometimes, opportunities to grow your business arise, but you simply don’t have the capital necessary to scale up your inventory or pull off complex international trade deals.
The good news is that you don’t have to let these opportunities pass you by. Purchase order and trade finance solutions can bridge the capital gap and let you finalize promising deals.
What Is Purchase Order Finance?
Purchase order finance is a funding solution that allows you to obtain the necessary capital to pay suppliers for goods required to fulfill customer orders.
This form of financing is particularly beneficial when you receive a large order but don’t have the cash on hand to procure the necessary inventory. By leveraging purchase order financing, you can accept and fulfill substantial orders without compromising cash flow.
The Role of Trade Finance
“Trade finance” is a broad term that encompasses various financial instruments to facilitate international trade and commerce. This umbrella term may include instruments such as:
Each of these tools can help you mitigate the risks associated with international trade deals.
For example, a letter of credit guarantees that a bank will pay the supplier. The seller is protected because they know they will get paid. However, these letters also protect buyers since payment won’t be made unless both parties meet the terms of the contract.
Benefits of Purchase Order and Trade Finance
Financing orders and trade deals offers several benefits compared to cash-based funding. Some of the most notable advantages include the following:
Improved Cash Flow
Just because you have the cash to cover a purchase order doesn’t mean you should use it. Tying up too much capital on a big deal that may not pay an immediate return can leave you cash-strapped. Purchase order financing allows you to maintain healthy cash flow levels while you work on big-ticket deals.
Increased Order Capacity
You can accept larger orders and expand your customer base by leveraging borrowed funds. Capitalizing on these opportunities can lead to increased revenue and market presence. When you have a chance to grow your business, you’ve got to seize it.
Less Risk
Trade finance instruments allow you to explore international opportunities without overexposing your business. You can take advantage of these financial tools whether you are a buyer or a seller.
Strengthened Supplier Relationships
Timely payments to suppliers foster strong relationships. You may even be eligible for discounts if you pay early. Factor these savings into your decision-making process when exploring trade and purchase order finance options.
Have Questions About Purchase Order Finance? Contact Us
Barrington Commercial Capital assists commercial clients by providing dynamic financing solutions. In addition to financing acquisitions and mergers, we can help you secure funding for purchase orders.
