Business Funding

The Fundamentals of Purchase Order Funding


In the world of resellers and distributors, a sudden spike in sales or customer demand is not uncommon. If you want to keep your business successful, you have to be prepared or well-funded when these situations arise.

Turning down a customer’s purchase order may not only cause you your sales but also customer loyalty and satisfaction as well. Capital solutions specialist MRKT Capital believes that purchase order financing is a quick and efficient way to fulfill those unexpected large purchase orders.

You can sum up the basic process in eight steps

  1. Your customer gives you a purchase order.
  2. You give this purchase order to your supplier and they reply with a written proposal stating how much it would cost.
  3. You apply for PO financing presenting the supplier’s proposal and get approved.
  4. The financing company pays your supplier, and your supplier fulfills the order.
  5. Your customer receives his order, and you send him his invoice.
  6. The customer sends payment directly to the financing company.
  7. The financing company deducts their fees and gives you the rest.

It’s a simple process

As long as you meet the qualifications required by the financing company, you can benefit from this system. These are:

  1. You are a reseller or distributor of material goods.
  2. Your supplier and customer are both creditworthy (No history of bankruptcy or serious litigation).
  3. You have a minimum of 15% or 20% profit margin (Depending on the financing company).
  4. You have a completed written purchase order from your customer.

Now, there may be other funding options available to your business. What’s important is that you analyze and understand each one, and choose what’s best for your business needs, and what’s most attainable for your finances.

Having long business relationships with suppliers and customers will not only get you the best rates, but will also build trust and loyalty with the entities that make your business whole.