Purchase Order Financing
Purchase Order Finance or PO Financing, is used to pay your suppliers, laborers, or other intermediaries for goods or services to generate additional sales. A company will need PO financing when:
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- You need expertise to handle the Financing
- You need additional working capital
- You need a quick response to an immediate sales need
- You don't want to incur additional credit risk, be it foreign or domestic
- You want your buyers and sellers to not know each other
- You want the opportunity to make additional profit
J&D Financial understands all the above reasons and will work with you to fulfill your purchase order funding needs.
We offer purchase order finance transactions for all types of transactions that include:
- U.S. Supplier to U.S. Buyer
- U.S. Supplier to Foreign Buyer
- Foreign Supplier to U.S. Buyer
Every PO funding transaction stands on its own. We look at your business history, the credit worthiness of the buyer, the ability of your supplier to produce the goods, and if the transaction is profitable for all parties.
We consider purchase order financing for those companies with a track record of producing goods. Your company may be young or a startup, but your company management must have a proven track record of producing goods.
Buyers Purchase Order
Your buying firm must be reputable with a good credit line. The purchase order for factoring must be verifiable.
Your suppliers must know your product and be able to produce it in time and to meet your buyer's terms. The supplier must be a firm with a good business history and track record of producing goods.
The transaction after all expenses must make a profit for all parties. Payment of the money lent to support the transaction can come from any number of sources such as factored receivables.
Finished goods are easier to Finance than non-finished goods. J&D finances both types.
Purchase Order Funding is available only to qualified customers. PO factoring or financing falls into two types:
- Finished Goods
- Non-Finished Goods
Finished Goods refer to transactions where the goods are never touched by you. Usually, these goods go directly from your supplier to your buyer. You never take direct possession.
Non-Finished Goods are when you, the seller, take possession of the goods either in a raw state (such as yarn to make blue jeans) or a semi-finished state (partially sewn blue jeans). In either case you must take possession of the product.
Finished Goods are easier to finance than Non-Finished Goods. We will need to assess your ability to complete the transaction in processing the goods for the final shipment to your buyer. J&D Financial Corporation provides purchase order factoring for both Finished and Non-Finished Goods.
In order to consider purchase order loans for your firm we will need:
- A Completed PO Factoring Application Form
- Your invoice to buyer
- Your supplier's invoice
- Your purchase order to your supplier
- Profit on transaction – gross margins >18% – see work sheet
- Business History
- P&L (most recent)
- Balance Sheet (most recent)
- Time frame to produce goods
- Credit information on your buyer
- Supplier Information
- Finished Goods or Non-Finished Goods
Generally we charge 5% (sometimes more, sometimes less) one-time fee for purchase order loans on the gross amount to be paid by the buyer. Sometimes there may be an additional interest charge on the money advanced if the purchase order takes greater than 30 days to complete. Every purchase order pricing is individual and unique. This purchase order fee does not include the factoring fee which may cost an additional 3% to 6% when you are factoring the receivable. (Learn more about Purchase Order Factoring Fees.) J&D can consider financing a purchase order transaction to be paid out by another factor or lender.
In order to see if the purchase order finance transaction will make money for both parties, please fill out the worksheet section of the application form. As you can see, the total cost of purchase order financing fee and factoring fee can range from 8 to 11%. In factoring purchase orders, since both of us need to make money, the gross margin should be greater than 18%.
PO Factoring – How it works
- Your buyer gives you a purchase order for goods.
- You give your supplier your company's purchase order to fulfill the buyer's purchase order. The gross margin between the two purchase orders should be at least 18%.
- Your supplier ships goods to you (non-finished goods) or your buyer (finished goods). Payment to your supplier is made by J&D Financial immediately or sometime in the future subject to the negotiated terms. This is called purchase order funding or financing.
- If the goods (non-finished) were sent to you from the supplier, you finish making the product and ship the finished product to your buyer.
- You send your invoice for your buyer's order to J&D Financial for factoring.
- J&D Financial factors your invoice to your buyer. We advance your funds against this invoice less any factoring and purchase order finance fees. In this case, the funds are used to make payment to J&D Financial for paying off the amount we paid to your supplier for the purchase order financing plus any fees for our factoring services.
- When your buyer pays the invoice per terms, we collect our factoring advance and interest charges. Any funds left are forwarded to you.