Once you apply for raising funds through a purchase order financing company after analysing all your options, there is a process that goes in the backend. It is a long process since the money comes back to you. Here we will discuss the whole process through which the fund reaches the company.
The initial process: This includes everything before approaching a PO Financing Company. The company gets a purchase order and assesses the requirement to fulfill the order. The requirement is sent to the supplier who estimates the costs and lets you know about it by writing an invoice.
Apply for finance and receive it: The next step is applying for finance from the company. Depending on the supplier’s reputation and the customer’s creditworthiness, the supplier will be paid to fulfill the order. The company can receive up to 100% financing but generally, it ranges from 80-100% of the amount applied for.
Delivery of goods and invoice creation: Once the supplier gets the necessary funds, he produces the goods and delivers them to your customer. In the meanwhile, you draw the invoice on the customer and forward it to the company.
Final phase: Once the customer receives the invoice, it pays the PO Finance Company directly and not to you. The company forwards the remaining money after deducting their fee for the services they offer which can be considered as the interest for the services.
So, this is a brief of the process that goes on when a company applies for the finance its order with a purchase order finance company. This also allows some significant benefits to be bagged by the company over raising the finance through a loan.
