It seems counterintuitive that a company could have too much business. A big order, more customers, and growth are what every upstart dreams of. More business means more opportunity for profit. It can be the big break that puts a company on solid financial footing or propels it from a startup to a serious player. Yet a big order, new customers, or growth can also be the death of a business.
Imagine a shoe company that has hot new designs and moves from being a boutique brand worn by a few hip kids to the style everyone wants to wear. More retailers start putting in orders for the shoes, but the company doesn’t have the capacity to produce enough to fit demand or enough cash on hand to increase that capacity. The window of opportunity in fashion doesn’t last long, and the company knows if customers can’t find their product, they will be forgotten before they ever get their next design out.
Or take the case of a small town construction distribution center in North Dakota. The oil boom has been good for business and clientele continues to grow. Then an oil company comes in with a purchase order for 500 construction helmets. It’s five times larger than any order the distribution center has ever had. They don’t have near that many helmets in stock and don’t have enough cash to get the helmets from their supplier. If they say yes, they won’t be able to fulfill the order and will be in for a lot of trouble. If they say no, the oil company will find another distributor, or maybe go straight to their supplier for this order and for future orders.
So we see big orders and new customers can wreak havoc on small businesses. But with a little help, even the situations above can be the big breaks that catapult a business to the next tier of success—and that help can come from Purchase Order Financing.
The basic concept of Purchase Order Financing is simple yet profound. A third party—a lender like Millennium Funding—takes the purchase order and gives that money upfront to the provider. In the cases above, the shoe company and the distribution center receive purchase orders from their buyers. They then turn the purchase orders—for the shoes and the 500 construction helmets—over to the PO financing company. The financing company will front the money promised in the PO so the companies have the cash flow they need to take and fulfill the orders. In this way, the companies not only get the business—and the profit—for these transactions, but also gain valuable clients for the long haul and continued growth potential.
When the orders are fulfilled with the help of the added cash flow, the buyers—the retail shoe stores and the oil company—will pay the purchase orders. The financing company will take a small percentage, and the companies who were so close to missing a big break will instead be that much closer to success.
The terms of Purchase Order Financing—the rate and length of repayment, as well as what information is required to begin—can vary. But Millennium Funding can help. With years of expertise and a track record of success, Millennium Funding can take your company from being “oh so close” to achieving your goals. Purchase Order Financing can not only save your business, it can be a catalyst to help you thrive.