a. Purchase order financing is easy: For the most part, this sort of financing is fairly easy. There are not a lot of hoops to jump through, like there are with bank financing. As a long as a company has credit worthy customers and invoices to sell, it is not incredibly difficult to find a Factor to work with.

b. Purchase order financing is fast: Such financing is incredibly fast. In fact, it is one of the quickest ways to get cash. If a business already has an established relationship with a factoring company, they will often times be able to get money within 24 hours. If it is a company’s first time working with a particular factor, then the process may take little longer, roughly 4-7 days. This still is incredibly fast and allows company’s to quickly infuse much needed cash into their business.

c. Purchase order financing doesn’t rely on a company’s credit history: Companies with average-to-poor credit histories will have a very difficult time getting a loan from a bank. If they use purchase order financing then this is not even a concern. This is because factors only consider the credit worthiness of a company’s clients because they will be who the Factor will be collecting money from. They don’t care about the business’ credit who owns the invoices.

d. Purchase order financing allows companies to raise money without debt: Many companies are forced to go into debt in order to keep their business afloat, make big purchases or to finance growth. This can be dangerous and puts a business at risk of going under if they are not able to pay back what they owe. One of the great things about purchase order financing is that it is a way to generate cash without taking on new debt. The Factor subtracts their payment from the collected invoices.

e. Purchase order financing is available to new businesses: New businesses will find it difficult to get a bank loan. Banks simply are not interested in loaning money to companies that have not been in business very long. This can put such businesses in a bind. There will likely come a time when they need money but aren’t able to secure it through traditional means, such as through a bank loan. Often times, such companies turn to credit cards, quickly racking up expensive debt. A much better solution might be to use purchase order financing. It allows businesses to quickly raise cash without expensive debt (credit cards) and without relying on a bank.

I have one of the toughest roles in invoice factoring and purchase order financing. I do the underwriting for Paragon Financial Group. Cash Flow Consultants love me when I approve their deal but often misconceive me as the bad guy when I decline their prospect. However, after over 13 years in factoring, I know what can be factored, and which deals to pass on. This has been learned through my making many mistakes over the years as well as good decisions. This is the less glamorous side of factoring but perhaps the most important one.