Many vendors in the U.S finds that their overseas suppliers want payment upfront with C.O.D but their customers want to pay on net 30, or net 60 days term. Therefore, cash flow becomes a potential problem for many manufacturing company while the goods are in transit since the invoices are not paid by buyers until receipt.
In critical business financing decision, purchase order financing is alternative financing method to free up cash for time sensitive business expenses and does not show up as a debt for the company by making it possible for purchase discount and obtaining additional approval of funding at a later date. Typically, rates are as low as 4% for a 30 days letter of credit. The steps for obtaining this type of funding are relative simple. You will need a purchase order from your customers, reliable suppliers for your products and invoice from your supplier.