Many business opportunities come with an associated challenge. For most entrepreneurial businesses, the greatest challenge is financing the business opportunities created by your sales efforts. What are your options if you have a sales opportunity that is too large for your normal scale of operations? Will your bank provide the necessary financing? Is your business a startup, or too new to meet the bank’s requirements? Can you tap into a commercial real estate loan or a home equity loan with insufficient time to conclude the transaction? Do you decline the order? Fortunately, there is an alternative way to meet this challenge: You can use Obtain Order Financing & Letter of Credit financing to deliver the product and close the sale.
What Is Purchase Order Financing?
Obtain order financing is a specialized method of providing structured working capital and loans that are secured by accounts receivables, inventory, machinery, equipment, and/or real estate. This type of funding is excellent for startup companies, refinancing existing loans, financing growth, mergers and acquisitions, management buy-outs, and management buy-ins.
Purchase order financing is based upon bona fide acquire orders from reputable, creditworthy companies, or government entities. Verification of the validity of the purchase orders is required. The financing is not based on your company’s financial strength. It is based on the creditworthiness of your customers, the strength of the commercial finance company funding the transaction, and in most cases a letter of credit.
What Is A Letter Of Credit?
A letter of credit is a letter from a bank guaranteeing that a buyer’s payment to a seller will be received on time and for the correct amount. If the buyer is unable to make payment for the buy, the bank is required to cover the full amount of the acquire. In a buy order financing transaction, …