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Finding the working capital you need to take on challenging orders can be tough, but there are options that you can tap into your business assets. This sidesteps the lengthy approval processes for traditional loans and in some cases, the cash advance does not even appear on a credit report. For businesses that use purchase orders and invoice billing, the question of which asset to finance often comes up. Understanding when each one is best used will help you to get the most out of purchase order financing.

Consider Your Capital Needs

If you need general operating capital to meet your regular obligations, you might want to lean toward AR financing. By sending out all your invoices at once, you stand to get a larger advance than if you finance all your purchase orders, at least in most cases. If you do not have a lot of unpaid invoices but have recently gotten a lot of orders, then the situation is reversed and you’re going to want to finance those orders.

When you need money to take on the orders themselves without disrupting your other cash flow obligations, that is generally when purchase order financing works best. You can finance a large rush order with its own value, allowing you to isolate its costs and profits from the general flow of business. The result is a windfall opportunity that does not disrupt your regular processes.

In some cases, you may even want to finance both purchase orders and invoices to raise as much capital as possible at once. You would need to apply for each separately, but nothing stops you from using both if you qualify.

Who Can Use Purchase Order Financing?

Invoice financing is the more popular choice in large part because it is accessible to a wider range of companies. Almost every company that uses purchase orders also uses invoice billing for at least some of its transactions. Only a fraction of the companies that use invoice billing use purchase orders, however. That asset tends to be limited to manufacturing and import trade companies, with a few rare exceptions in other areas.

Make the Most of Your Business Assets

The best cash management solutions are the ones that make use of all the available tools at your disposal. That means you should work out a strategy for financing your working capital needs with options for everyday cash management, rush orders, repair and maintenance emergencies, and industry-specific key need categories. That way, you’ll know exactly when to use purchase order financing and when to opt into another financial product.