The PO Finance Apparel Distributors Need: How It Works

If you have a small business, then you need a plan for growth. That’s the way it works, even in the apparel industry. You try to secure new contacts and perhaps move into new markets. You try to provide more products and add new ones. And of course, you need to make sure that you have the capital to fund your business expansion.

This is where some apparel distributors can have a problem. For example, let’s say you’ve been doing a good business supplying garments to retailers in your area. Now that you’ve established your expertise, one customer now asks for you to supply a volume you’ve never done before. You know you’ve got the chops to arrange the deal to the customer’s satisfaction, but your problem is that you may not have the capital to fund this business opportunity.

Of course, you’ll try to get some money from your bank. After all, that’s where your company’s bank account is. But banks, for all their improvements lately, aren’t really all that enthusiastic about lending to small businesses.

You’ll need to make sure that your business is in order, and that your credit rating is absolutely tops. That goes for your personal credit rating too. And then they drag their feet before you even get your money—if you get your money. That’s a very big if.

So if you get a big order, what you need to do is to use that particular purchase order to get the money you need. With PO finance apparel distributors should know how it works. This is the process:

  1. You get the huge purchase order. Instead of saying no to your customer, you say yes. This is the growth you’ve been waiting for, and it’s an opportunity not to be missed, especially if it offers a very nice profit margin.
  2. You approach the PO financer. Some lenders actually specialize in PO finance apparel deals. You tell them about the order and they ask for some pertinent details about the deal.
  3. They check out the opportunity. They’ll first see if the purchase order is real, because there are some scammers about who fake purchase orders to get some money. Then they check out your customer’s ability and willingness to pay the order, as well as your supplier’s ability to supply what’s been asked for. There are some other factors, but these are crucial.
  4. You get the money you need. Actually, the money doesn’t really go to you at all, but directly to your supplier. Often this takes only a couple of weeks after you first contact the lender. It’s a stark contrast to how banks operate, since banks consider two weeks as part of the initial stages of the loan application.
  5. The supplier makes and delivers the goods. The lender oversees this stage too, to see that everything’s going according to plan.
  6. Your customer receives the goods. When they do, they pay the lender.
  7. You get your profit. The lender then takes out the amount they invested plus a small fee for their services, and then you pocket the profit.

That’s how the PO finance apparel deal works. It’s really that simple and that easy.