Operating a business comes with a ton of financial responsibilities. Though you might be seeing a lot of sales, it doesn’t always mean you have the available capital to fulfill orders and keep your company headed in a successful direction. This is why it is important to understand what financing solutions are available to your business. Services like factoring and purchase order financing can both be useful during different times. Learn more about these options and discover how you can get your company through a period of restricted cash flow.
First, take a look at factoring. When your business is dealing with customers who are not paying for goods or services, you could be sitting on a pile of unpaid invoices. Qualifying invoices can be sold to companies that offer a factoring service, providing you with a percentage of the value of the invoices right away. This is considered an advance on the funds you are already owed, rather than taking on extra debt through a loan. Factoring is a flexible service that can be used whenever invoices start to accrue. To qualify, the invoices must come from eligible organizations.
While a service like factoring aims to help businesses receive money after completing a service, financing a purchase order is slightly different. There will come times when your budget is tight and you are unable to pay for the basic expenses related to starting a new job for a client. In this scenario, purchase order financing can prove advantageous. With this type of service, you can receive the money you need to fund the costs associated with starting a job. This can be a great way to keep your business flowing even when your available capital is low.
Which Is Best?
Deciding between factoring and financing a purchase order is simple. Both services are useful, but are geared toward entirely different aspects of your process. If you are trying to begin work for a client but don’t have the money for materials at the moment, financing a purchase order makes the most sense. Conversely, services you’ve completed that have not yet been paid for will require factoring for a solution to be found. Each service will prove beneficial in specific ways, so be sure to research the details.
Getting your business through a difficult financial period can be tricky. Learn more about services like factoring and purchase order financing to find the right solutions when you require them.