The Appeal of Government Purchase Order Funding

Landing a purchase order from the government is one way of growing your business. You have a customer that will surely pay you
Landing a purchase order from the government is one way of growing your business. You have a customer that will surely pay you

If you’re running your own company, you’re usually required to put up some of your assets as security when applying for a bank loan. The security gives the bank peace of mind, because the collateral acts as an alternative form of payment if you’re unable to pay back the loan.

But you may have other assets you can use to secure additional funding. If you’re having cash flow problems, you may find yourself having to walk away from a lucrative government contract simply because you don’t have the capital to pay for supplies necessary to fulfill the contract. But with purchase order funding, the purchase order itself is enough to get you the funding you need.

Here are some reasons why a government purchase order can easily be used to obtain funding:

  • Approval for purchase order funding depends on the ability of the customer to make payments. And that’s why government purchase orders are so attractive. Lenders know for a fact that the government will pay up. There is virtually no chance at all that the customer will declare bankruptcy and become unable to pay.
  • Government purchase order funding provides greater amounts of capital than purchase orders made by private companies. In purchase order funding, you get a percentage of the value of the purchase order in advance, which you use to pay suppliers so that you can fulfill the contract. The more reputable and secure the customer is, the higher the percentage of the funding.

And there’s nothing as secure and reputable as the government (in the US, at least). That’s why PO funding lenders can offer as much as 85% of the value of the purchase order. When the PO is issued by a private firm or by a lesser-known public firm, the funding may only be 50% of the value of the contract.

  • PO funders with experience dealing with the government can lend you their expertise. These funding institutions can even help you land a government contract in the first place. They also know how governments define certain terms in the purchase order, so you can be sure of what’s expected from you.
  • Purchase order funding providers can also help in dealing with payment collection later on through factoring. With factoring, you get an advance on the payment instead of having to wait for days for the government to pay up. You also have your funder bear the burden of collection the payment from the government. They’re the ones who have to deal with government red tape regarding payment collections, not you.

Landing a purchase order from the government is one way of growing your business. You have a customer that will surely pay you, and there’s also the prestige of landing a government contract which you can use to attract more business in the private sector.

And if you fulfill your obligations properly, you also increase your chances of getting more government contracts in the future. You’ve already proven yourself, and the government may be more likely to direct more business your way because you’ve already demonstrated a proven ability to fulfill orders promptly and efficiently.

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Chris Lanchech

Hi everyone, my name is Chris and I am a junior analyst at Neebo Capital and an inspiring blogger. We enjoy speaking with business owners and entrepreneurs who come to Neebo Capital looking for cash flow solutions. Give us a call toll free at 1-888-382-3766 or Visit us online at www.neebocapital.com

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