How to Choose a PO Financing Company
If you’re not already familiar with the topic of Purchase Order Financing, read this post first.
Anyone who has dipped a toe into the world of PO Financing (or even googled the term) knows that there are a multitude of companies to choose from. If you’ve decided that this funding option is a good fit for your business, the abundance of eligible partners can feel like a hurdle rather than a benefit…how will you choose the right one?!
As with anything relating to the financial health of your business, it’s important to be extremely selective. The great part about a large pool of funders is that you have the luxury to do so! The following are a list of ‘will not compromise’ checkpoints to keep in mind as you evaluate potential partnerships.
Not all deals in the financing world are created equal. While one funding company may offer you 90% of your purchase order’s value, another may offer 97%; explore a sufficient number of options before assuming any percentage is ‘standard.’
Similarly, some companies will include fees or penalties for such things as late payment by your customer, administrative fees, or higher rates for purchase orders submitted by companies with imperfect credit. Some of these fees may be warranted, but make sure to ask up front for disclosure on all potential charges. It is better to be informed early rather than when you’ve gotten as far as reviewing the contract.
Since PO Financing companies rely on timely payment from your customers in order to get paid, it’s common that they will act as an extension of your billing department and take over the collection process themselves. This means receiving payment on your behalf, and checking in with the customers directly if there is any delay.
Needless to say, you want your customers to be treated courteously, and you certainly don’t want them harassed! Pay close attention to how the potential financer treats you during the inquiry process, including nuances in their tone and communication. This most likely will reflect the culture and flavor of their company’s customer service. It’s also a good idea to get references relating specifically to quality of service from other companies that they have funded.