Is It Possible to Factor or Finance a Purchase Order (PO) From My Customer Before I Deliver the Goods or Service?
This is an excellent question, and like many things, the answer whether a PO can be factored is… it depends.
What are the Questions to Get You the Critical Working Capital to Fulfil a Purchase Order?
Do You furnish a Product or Service?
If a service than this is tough, for example, you pay someone to mow your yard in advance, and they take your money and never show up again. Unknown to you is that they sold your invoice to a factoring company. When the factoring company contacts you for payment, and you explain that services were never rendered the factor is out of whatever they paid for the invoice. That is a simplistic example of why it is tough to get an advance against service work.
It is not impossible to pre-fund a service, but that is where a business cash flow lender can help. They look at your monthly cash flow stream and using a formula will advance you some percentage of that number. WIP Funding doesn’t offer business cash funding, but we have a sister company that does provide a cash flow based product.
What Type Product do You Resell or Manufacture?
If you are importing goods for resale or act as a wholesaler, WIP Funding can help you. Our PO Funding Programs include Vendor Guarantees, Trade Acceptance Drafts, Cash Against Documents Funding, and Letters of Credit. These funding products are all designed for importers, resellers, and wholesalers who are dealing with goods that stay in the same physical state.
What if I need Manufacturing or Work in Process Funding?
Some factors make funding the production process of their specialty. An example would be us, WIP Funding. These factors can buy raw materials and components to build and fabricate your finished products. Read here for more in-depth information about Work in Process Financing. Be ready to discuss with us in detail all the vendors you buy a product from and your production process. Also, we will need copies of the purchase orders from your customers with all the backup documentation.