Are you selling products or services to the proverbial big box retailers? To companies like Wal-Mart, Costco, Sams Club, Lowes, The Home Depot and others? There are many advantages to selling to these companies. For starters, they have incredible purchasing power and can place large orders. They can truly help your company grow incredibly and take it to the next level.

On the other hand, they also have incredible clout and negotiating power. That means that they can, and often decide to negotiate payment terms to their benefit. It is not uncommon for big box retailers to pay their invoices in 30 to 60 days. This creates two distinct types of problems, depending on your financial situation:

You cant afford to wait to get paid

If your biggest challenge is that you cant wait to get paid by your big box retail clients, the solution may be to factor your invoices. Invoice factoring is a form of financing whereby you sell your invoices to a factoring company who pays you for them. They wait to get paid, while you are paid immediately.

You need money to pay your suppliers

If your big box retailer client places an order that is too large for your current financial situation, your best option is to use purchase order finance. This type of financing is also provided by a factoring company, but covers all your supplier payments. It enables you to complete the order and make the sale. Like factoring, the transaction is settled once the client pays the invoice.

Which one should you use?

Both factoring and purchase order financing can be very useful. Factoring tends to cost less, so as a rule of thumb you should try it first. However, if you need more financing than what factoring can offer, then you should add purchase order financing to the solution portfolio.

Both solutions can be quite affordable though costs will depend on your financing volume. Much like regular retailers, factoring companies give volume discounts and charge less if you use them frequently. Ideally you are better off using factoring as a recurring financing tool while deploying purchase order financing on a as needed basis to help with the big orders.

Marco Terry

Marco Terry owns Commercial Capital LLC, a firm that specializes in providing invoice factoring financing, medical factoring, freight bill factoring and purchase order financing and funding to companies in the US and Canada.

He can be reached at (866) 730 1922