If you’re looking for financing to help grow your business, purchase order financing may be a good option for you. This type of financing can help you get the money you need to buy inventory or supplies for your business. However, in order to qualify for this type of financing, you will need to provide certain documents during the due diligence process.
In this blog post, we will list each document required and describe what it is and why it is needed. By the end of this post, you will have a good understanding of what documents are required for purchase order financing.
The first document you will need is a purchase order. This document is issued by the buyer and states the quantities and types of products or services that the buyer agrees to purchase from the seller. The document should also show timelines for delivery and other expectations the buyer has. This is what the lender will use to qualify your business for purchase order funding.
The purchase order is important because it is used to determine the amount of financing that the lender will provide. The purchase order must be from a reputable and creditworthy buyer in order for the lender to approve the financing.
The next document you will need is an invoice. This document is issued by the supplier or manufacturer and states the quantities, types, and prices of products or services that they are supplying.
The invoice is important because it is used to determine the cost of goods. Sometimes if the goods need to be produced, there will be a pro-foma invoice. The pro-forma invoice will indicate lead times, payment methods, and sale terms.
The last document you will need is a contract. This document outlines the terms and conditions of the purchase agreement between the buyer and seller. There can sometimes be one contract with your customer, and one with your supplier. Where the PO and pro-forma invoice outline the main terms of the agreement, it is sometimes smart to also have a more in depth contract.
The contract is important because it provides security for each party. It may lay out other terms such as warranties, non-competes, or other agreements.
There you have it! These are the three documents that you will need in order to apply for purchase order financing. Now that you know what is needed, you can begin the application process.
Benefits of Purchase Order Financing
There are many benefits of purchase order financing. Some of these benefits include:
- PO financing allows businesses to grow without taking on too much debt
- PO financing can be used to finance large orders
- PO financing can be issued more quickly than bank financing
- PO financing doesn’t require a long trade history
Purchase order financing is a great way to finance your growing business. If you have any questions, be sure to speak with a financial advisor. Thanks for reading!