A country’s economic growth is heavily dependent on business ventures. Small businesses play a crucial role in the economy of a country. Though the big and mid-scale businesses are known to be the major players in the economy, small businesses are also known to pitch in, in their own way. Firstly, small businesses help to lay the foundation of the economy and other bigger business houses. They provide employment opportunities to various people mostly belonging to the grass root level. This indeed helps in the economic development of the country.
The biggest problem faced by these companies is funding. If the company gets a dream order and there is not enough capital to make it happen, the best option to consider would be purchase order financing (or PO Financing). PO Finance companies provide funds to pay the suppliers directly so that the company need not have to exhaust their cash reserves. When a small business company approaches a PO finance company, they take the responsibility of complete funding for the project. Once the payment is received from the client, a portion of the profit is passed on to the small business company. The advantage is that it never shows as a debt on the balance sheet.
Additionally, several Trade Finance companies are now shifting their focus towards small to medium sized businesses. It provides capital for both domestic and overseas transactions based on the business opportunity the company has and not on the company assets and trading history.
If the small business company has good orders, customers, new contracts or consistent suppliers, then the Trade Finance company can comfortably fund the small business company. The key criterion is that the small business company should have a business order from a trustworthy client who is financially sound in order to give comfort to the financier.
Trade Finance Companies help small timers by providing 100% of the supplier cost, facilitating companies to successfully deliver bigger orders. This assists them to increase their turnover and gives them confidence to place bigger orders; thus greatly enhancing the customer/supplier relationship. Hence, quality and timely delivery is ensured.
If the Purchase Order is collateral, then the Trade Finance Company provides a letter of credit directly to the supplier. The supplier will in turn ship the order straight to the client. Afterwards, part of the payment made by the customer is given to the small business company. PO companies generally serve small businesses like wholesalers, manufacturers and resellers. Today, small businesses are thriving in the market because of Purchase Order finance companies and the number of participants in the industry continues to grow.
