July 6, 2023

Purchase Order Financing: A Comprehensive Guide for African Businesses

In the dynamic landscape of business, companies often encounter challenges when they receive promising purchase orders but lack the necessary funds to fulfil them. Limited cash flow or working capital can hinder business growth and prevent African enterprises from seizing valuable opportunities. However, there is a solution that bridges this financial gap and empowers businesses to thrive: Purchase Order Financing.

Purchase Order (“PO”) Financing is a funding solution designed to address the challenges businesses face when they receive purchase orders but lack the necessary funds to fulfil them. This type of financing allows businesses to access the necessary funds to pay suppliers, cover production costs, and fulfil customer orders, mitigating the impact of limited cash flow or working capital.

At Fluna, we understand the challenges businesses face in managing cash flow to meet customer demands. That's why we offer Purchase Order Financing, a specialised trade finance solution that equips businesses with the necessary working capital to fulfil their POs and seize growth opportunities.

Benefits of Purchase Order Financing for African Businesses:

Fulfil Large Orders: By leveraging purchase order financing, African businesses gain the ability to accept and fulfil larger customer orders that would have otherwise exceeded their financial capacity. This unlocks opportunities and facilitates the expansion of their operations, enabling businesses to cater to larger clients.

Working Capital Support: By providing upfront funding for production and supplier payments, purchase order financing ensures that businesses have the necessary working capital to meet their immediate operational needs and fulfil customer orders promptly.

Flexible Financing: Fluna's PO Financing product provides businesses with a flexible funding option that adjusts to the unique needs of each order. Unlike traditional loans, our solution allows businesses to secure financing solely for the specific orders they receive. This approach effectively minimises their overall financial burden, granting them the freedom to focus on fulfilling orders and growing their business without unnecessary financial strain. 

Mitigating Risk: Trade finance providers, including Fluna, conduct due diligence on customers and conduct credit risk assessments as part of their process. This thorough evaluation helps African businesses mitigate the risk of non-payment and safeguard themselves against potential losses. By partnering with trusted trade finance providers, businesses can enhance their protection and ensure a more secure trading environment, benefiting both buyers and exporters alike.

Boosting Credibility: Having access to purchase order financing enhances a business's credibility and reputation. It demonstrates to customers and suppliers that the business has the financial capability to fulfil orders on time, improving trust and attracting new opportunities.

Purchase Order Financing can transform the trajectory of businesses across the African continent.

How Does Purchase Order Financing Work with Fluna?

With Fluna’s Purchase Order Financing, businesses operating in Africa can quickly get financing (potentially up to $1m) to meet customer demand. The financing structure is also flexible compared to traditional banks, as it is structured to match transaction terms and cycles.

Here is the Fluna Process:

Application: When a business receives a purchase order from a customer, they can approach Fluna for financing. Once onboarded on our platform, the business must submit KYC and KYB documents, the purchase order(s), proof of past completed POs, financial statements, and payment records to help Fluna with its assessment. 

Assessment: Once the application is received, Fluna will immediately conduct its due diligence on the business, assessing its creditworthiness, and the overall viability of the transaction. Once the evaluation is done, Fluna will make its credential decision and the necessary documents will be shared. All of these will be done within 72 hours of complete documentation.

Disbursement: Once the loan request is approved, Fluna provides the necessary funds directly to the supplier or manufacturer to cover the cost of goods or products within 48 hours. This ensures that the business has the necessary inventory or resources to fulfil the customer's order.

Repayment: When the customer pays the invoice, the business repays Fluna for the purchase order financing provided. The repayment terms are agreed upon beforehand and can be customised to align with the business's cash flow and sales cycle.

Purchase Order Financing with Fluna provides African businesses with the financial support they need to fulfil customer orders, manage cash flow, and seize growth opportunities. By partnering with Fluna, businesses can confidently accept and fulfil large orders, enhance supplier relationships, and unlock their full potential in the competitive global marketplace.

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