Common Misunderstandings Regarding Purchase Order Loans
Many businesspeople are wary of purchase order financing, even though these loans can be highly positive. Hesitation toward using them is tied to numerous myths that are able to be debunked. Here are a few that should be swept into the dustbin of history.
Purchase orders have a reputation for being the domain of shady individuals in charge of nefarious operations. The actuality is that all sorts of companies use them, including many that have grown into globally recognized brands. Purchase order loans are simply another way of paying for large orders without dipping into profits, staying afloat, and expanding operations, all of which are common business objectives.
Some think that purchase order loans are accessible only by offering collateral, such as real estate or bank accounts. In reality, assets do not need to be placed at risk. Contrary to bank loans, there is no extended commitment, and the payment terms are less stringent than under many agreements.
It’s correct that purchase orders have higher interest rates than loans from traditional banks. Still, they aren’t much more expensive, and most entrepreneurs will find them affordable. Personal accountants often tell clients that they’ll pay close to 50% interest on a purchase order loan. In fact, they rarely cost that much, and they’re often far lower. Expect rates comparable to those offered to high-risk clients.
Lots of businesspeople think that securing a purchase order loan takes a long time. On the contrary, getting one approved typically takes no more than a few days, which includes the research that lenders do on a client’s financial history. Money can be provided quickly, helping businesses satisfy client requests the instant they arrive. This differs from big banks, which can take up to several months to decide whether they want to extend a loan; it’s particularly frustrating when your options are limited during an extended approval process.
Luckily for those with bad credit, purchase order financing is easy to qualify for. What matters most is the creditworthiness of your customers. Assuming you have clients that are bringing in profit, it’s likely that your application will be accepted. Even brand new businesses and startups can be eligible for approval.
The negative opinions that purchase order financing suffers are undeserved. Once you recognize how many of these concerns are unfounded, you’ll be considerably more agreeable to the idea of using one to increase your venture’s cash flow.