When your business needs funding, the options can feel overwhelming. Should you go for a traditional loan or try purchase order financing? Both have their place, but knowing the differences can save you time, money, and stress.
In this post, let’s compare PO financing vs. traditional loans to help you decide—featuring insights from Factoring Express LLC. Keep reading and see how these financing options fit into your business!
Traditional Loans: The Basics
A traditional loan from a bank or lender gives you a lump sum you repay over time with interest. It comes in different types, such as term loans, lines of credit, SBA loans, equipment loans, micro loans, and so on. Each one has specific terms, rates, and qualifications, which are all set by the lender.
Bank loans are the most common form of financing for small businesses, but also has the highest rejection rate. In fact, according to non-profit organization Venturize, about 72% of bank loan applications for small businesses get rejected.
Pros:
- Lower interest rates, predictable payments
- Large loan amounts for big projections or expansions
- Longer terms to reduce monthly payments
- Potential for building your credit
Cons:
- Lengthy approvals (weeks or months)
- Strict credit requirements with often collateral like your home or equipment
- All sorts of fees, such as application, origination fees, pre-payment penalties, etc.
- Once you spend the bulk payment you are in a worse position than you were before you got the loan because now you have an added monthly payment.
PO Financing: The Basics
Purchase order financing advances funds to pay suppliers based on a confirmed order. It allows you to fulfill big orders you’ll otherwise turn away due to lack of immediate funds and inventory.
Factors like Factoring Express LLC pays your supplier directly, allowing them to produce, process, and ship orders on time. Once the customer pays, we collect the advanced cash and send you the profits, minus our small service fee.
The best part? You get funding for your purchase orders fast, easily, and without the excessive paperwork. At Factoring Express LLC, you can receive funding within 24 to 48 hours for eligible order – no waiting in vain!
Pros:
- Fast approval, most accounts get approved on the same day
- No debt added on your balance sheet
- Relies on your customer’s credit, not yours – works for all business sizes.
- The amount of money available grows as your business grows…automatically!
- Funding is available to you on a regular on-going basis for as long and often as you need it.
- No long-term contracts or monthly payments to stress about.
Cons:
- Higher fees than loans, and it’s tied to specific orders
Do you want to learn more about the PO financing process? See “How Purchase Order Financing Works” (#) in this separate guide!
PO financing vs traditional loans: side-by-side comparison
Factor | PO Financing | Traditional Loans |
Approval Time | 1-3 days | Weeks to months |
Cost | Higher fees (e.g., 2-5% of order) | Lower interest (e.g., 5-10%) |
Eligibility | Based on customer credit | Based on your credit |
Repayment | Paid from customer invoice | Monthly payments |
Debt | None | Adds to balance sheet |
Which is right for you?
Both purchase order financing and traditional loans work in injecting cash into your business under certain situations. However, it’s best to know which one is ideal, so you can save time, money, and maximize profits:
Choose PO financing if…
- You need quick cash for a specific order and have a reliable customer.
- You want to avoid another debt on your balance sheet.
- You’re looking for the perfect one-off growth opportunities.
- You don’t have the credit to secure bank loans and other credit-based forms of financing.
- You don’t want to give up equity in your business.
Choose a traditional loan if…
- You need long-term funding for general expenses and can wait for approval.
- You need larger capital for expansion that PO financing alone can’t cover.
- You’re looking for funds you can use for a variety of purposes, not just one tied to orders.
- You have a strong credit history and looking for lower rates and better terms.
Ready to get started with PO financing?
At Factoring Express LLC, we specialize in PO financing because it empowers businesses to act fast without the burden of debt. Instead of waiting weeks or months just for your loan to get rejected, you can fund orders with our quick, easy, and straightforward financing service.
With our PO financing, you no longer have to stretch your already-strained cash flow. Above all, we don’t impose minimums or strict contracts – you can fund any eligible order you prefer only when you want to.
Still unsure? Check out “Top 5 Benefits of Purchase Order Financing” (#) to see why PO funding might be your best bet. You can also reach out and talk to Factoring Express LLC for a tailored solution that fits your business!
