If a business is just starting out, there are many limitations and challenges to be faced. For instance, you may have gathered enough capital to set up your business, but sustaining it is another story altogether. A startup business usually has very limited working capital, because the revenues haven’t come in yet and there’s really not much to work with. This means that whatever capital is left will have to be budgeted properly to fund things that will make the business grow. It leave little room for operational expenses, especially if these expenses are unforeseen.
Purchase order finance services are the perfect solution for startups, because it gives them the ability to stretch their working capital without having to prove their creditworthiness or get into even more debt.
The fact is that startups usually have a hard time with traditional financing methods, and this is a challenge especially if you’re still trying to establish your business. The good news is that purchase order financing is here to save the day. Here are some of the most important reasons why startups will truly benefit from a purchase order financing arrangement:
- Startups usually have no track record to speak of YET.
Before banks grant loans, they will look at your credit history and track record. For startups, this is a challenge because they have barely anything to show. Purchase order financing solves this problem because it focuses on the creditworthiness of the customer placing the order, not the supplier or the startup that needs additional capital.
The purchase order finance will therefore be granted based on your customer’s ability to pay. Customers who place large orders are usually government agencies and other credible commercial entities, so their credit worthiness should not be a problem.
- Startups will have a hard time showing collateral.
Collateral is another requirement before loans get approved, and this is why startups will find applying for loans difficult. With purchase order financing, you don’t have to show collateral because again, it’s not your credit worthiness but your customer’s that matters.
- Startups have more important expenses to prioritize.
When a business is just starting out, you have to focus your cash flow on important things like R&D and marketing. After all, you have to make sure your products can really meet the needs of your prospective customers, and you have to constantly innovate to stay in the game. Marketing is another expense you need to prioritize. After all, you need to create hype for your business and find customers that will patronize it. Both of these require money. Lots of it.
So when a customer places a big purchase order, you can’t risk not being able to deliver on that order simply because you don’t have enough cash flow. This is why it’s important to get purchase order finance.
For more information about how you can avail of purchase order finance, please check out our website: www.neebocapital.com.