Manufacturers that outsource production to other companies, and wholesalers who have goods for sale to retailers and other businesses, make money by filling orders.
For example, if the local mom and pop retailer needs more product to put on the shelves, it can turn to a wholesaler for whatever they need.
As soon as small- to medium-sized wholesalers or manufacturers begin to see orders larger than usual, they might need to rely on some sort of financing to complete it.
Oftentimes, companies of this size can struggle to obtain financing from a bank for any number of reasons, such as limited available capital, lagging cash flow or a poor credit score.
When a bank tells them "No," owners of these businesses might feel as though there is no where else to turn, but that simply isn't the case.
Manufacturers and wholesalers that want to take advantage of potential game-changing orders from big-box retailers, such as Target or Walmart, without tying up too much capital should look into the possibility of purchase order financing. This type of lending agreement allows small-to medium-sized manufacturers and wholesalers to receive up to 100 percent of the funds needed to fill an order.
Purchase order financing comes with numerous benefits, such as allowing small businesses to fill large orders. It enables them to take advantage of opportunities for growth as well.
Additionally, it allows business owners to avoid having to sell equity to fill an order. In certain instances, owners are forced to go to financiers to obtain funds. While this enables them to fill an order, it also means they'll have to sell part of their business so they no longer own the entire company.