Accounts Receivable Financing Verses Purchase Order Financing

Two types of alternative finance companies often confused with one another to achieve and finance the debt financing for the purchase. Of course, sometimes confusing, however, are two very different types of financing solutions for companies that serve two very different purposes.

Accounts Receivable Financing is used when you have bills-is pending the report of aging and want to access cash, instead of waiting to pay at a later time. NOTE: To qualify for financing accounts receivable, your product or service, and it shall have been checked; Otherwise no accounts receivable invoices to use as collateral.

The two types most commonly used accounts receivable financing Asset Based Lending and Factoring:

You can get traditional bank financing or alternative financing business as a loan asset-based - based loans assets. If you qualify for bank financing, go that route first because the cost of capital is always less than the non-traditional loan asset-based. You get a line of credit from a non-bank lender bank I use their bills accounts receivable as collateral for the line. Each institution underwriting standards; However, the great thing to remember is the strength of your business that will continue to play a role in the approval. It will not be possible to obtain bank financing, if your business is losing money because banks are very conservative ... and rightly so; we do not make much money your online comparison with non-traditional lenders. These non-traditional lenders will still qualify their business in the underwriting process (less stringent), and some that have agreements related to the line to stay open.


Factoring - This is a form of financing where a 3rd party shopping simple accounts receivable invoices at a discount so you can get today's working capital instead of waiting 30, 60 or 90 days pay. Factoring is more flexible than loans backed by assets in the sense that you are qualified based on the strength of its customers, not its financial strength.

Purchase Financing Order, also known as the PO financing is used when the capital is needed to execute a command after receiving send a PO. Small businesses that begin Speck Receive may use this kind of alternative to help support the funding of growth. PO financing is meaningful only when profit margins are large enough to offset the cost of capital. It can be expensive; However, it is still cheaper than equity.

So remember, purchase order funding is used in front of an operation and financing of accounts receivable is used at the end of a transaction. If your company needs financing for growth or survival, theses two types of financing tools can be a useful financing.