It’s a fact of life for every business owner: making sure your customers receive satisfactory order fulfillment is critical to success. When a customer makes a purchase, they expect to receive their high-quality product on time. Unfortunately, sometimes budget or cash flow problems can make you wonder whether you’ll be able to fulfill all of your orders. In these scenarios, you might want to consider using purchase order financing to make sure that your customers are fulfilled, giving them an incentive for repeat business in the future. Here are some of the tip-offs that could indicate this type of financing might be a useful solution.
Can You Put Up At Least 10% of the Cost of the Order?
One of the first factors you’ll run into when considering purchase order financing is the splitting-up of costs between you and the lender. In most cases, your lender will put up about 80% or 90% of the supply cost, and you will have to pay the remaining percentage. If your company is in a situation where 10% of the order total is too much to put up, applying for a lump-sum loan might be more helpful than financing.
Are You Looking for a Short-Term Advance Solution?
Though it might sound similar to a loan, this type of financing is actually an advance given to you that has to be returned once your order’s been sent to the customer. This means that it could be ideal for those searching for a short-term solution, as opposed to a long-term series of monthly repayments.
What Type of Orders Do You Need To Finance?
Though it can be a great solution in the right situations, only certain types of businesses will qualify for it. In particular, businesses offering physical goods, rather than other services, are best suited to it. If you manufacture consumer goods, this financing option could be a good match.
Even when you have little working capital and are wondering how to stretch your company budget any further, declining to fulfill customer orders can have serious negative ramifications for your business, both in terms of repeat business potential and in terms of overall reputation. Because fulfilling quality orders even when cash is scarce is of the essence, you may want to use the above guide to decide whether to turn to purchase order financing as a way of getting your customers what they want, even when the purse strings are tight.