Lets start with a simple question: is your company a good candidate for purchase order funding? Generally speaking, your company is a good candidate for purchase order funding if the following are true:
- You buy and then resell products without any modifications or customizations.
- Your company does not directly manufacture the products that you sell.
- Your gross margins are at least 20%.
- Your suppliers have a good track record of delivering products and are in good financial shape.
- Your customers have good commercial credit (government/councils/parastatals/big corporates/universities).
- Your purchase orders are non-cancelable.
Purchase order financing hinges mostly on the financial strength and creditworthiness of the company who has placed an order with your business, and not on your business itself. This makes a viable option for new businesses and those with average credit.
