Purchase Order Finance is a kind of Loan opted by people quite frequently and the availability and terms associated with this type of finance depends on various factors like:
- Reputation of the applicant
- Issuer of the purchase order
- Goods or services requisitioned
- Availability of guarantor
- Nature of transactions
- Tenure of the finance.
- Cross-border transactions, if any
When one wants to avail purchase order finance, he visits his bank with all the work orders he needs to complete. It may be a single order or a bunch of orders. There may be cash flow issues, so he approaches his Bank to lend him cash to complete the job. In such cases, the work order is enough; there is no requirement of any invoice. Advances related to invoices are termed as factoring.
Purchase order financing is very popular as contractors are able to generate cash when they fall short of cash. They need not delay or turn down the job, for shortage of cash. For that will not only result in revenue loss but also damage the reputation of the contractor. Contractors working with Government Departments usually avail this loans as they at times face delay in getting their payments and this option leaves them in a better place