Purchase Orders and Cash Flow: Can an MCA Help?
For start-up businesses, purchase orders are a blessing and curse. They demonstrate that your product or service has a valid demand in the market and that people are willing to do business with you to bring it consumers. On the other hand, when you get a purchase order, you have to fulfill it, and that takes working capital. Although many small businesses turn to conventional lenders like banks for business loans, a merchant cash advance , or MCA, could be a better option. If you’re considering your options for business loans in New York, NY for a purchase order, here is what you need to know about making the order and your financing of it a success for your company.
Are you ready to fulfill a purchase order?
As enticing as a purchase order can be, if you accept one before you are ready to leverage it appropriately, it could actually set your company several steps back. Before you accept a purchase order and begin to take on debt to fund it, start by ensuring that you have suppliers you can count on to deliver quality goods, free from flaws, in a timely manner. If your supplier stumbles, then you do, too, and you could lose your ability to attract a new purchase order in the future. Examine the order to make sure it is not cancelable and does not have consignment or guaranteed sale clauses. These terms allow the company that delivered the purchase order to withdraw from it or refuse payment if you don’t meet sales goals, which would leave you with bad debt on your books.
How should you fund your order?
Most companies look to banks for business loans, but there are drawbacks to this conventional approach. Loans take time to process, which you may not have when you need to confirm an order, and the approval procedure is lengthy and invasive. If you’re a new business, you may struggle to be approved. MCA funding can be closed very quickly because it doesn’t involve the same approval process. Your loan is repaid as a portion of your future sales transactions, which means it is easy to budget for and doesn’t require you to come up with money you don’t have. MCA funding gives you the freedom to grow your business without fighting from behind, as you do when you take on a bank loan.