When it comes to business financing, there are many myths surrounding the topic. One of the most common types of financing that receives rumors is purchase order financing. This type of funding happens to be one of the most common types. Unfortunately, it also has many rumors surrounding it that just aren’t true.

Here are four of those myths.

Purchase Order Loans Have Too many Risks

If you are unfamiliar with this type of financing, then you might think that it is more risky than traditional forms. You may have heard that the lender will require collateral from operating expenses, payroll, real estate or from your bank account. You don’t have to put up those assets. The loans extension only happens after a purchase order transaction is complete.

Purchase Order Loans Are Disgraceful

Many people believe that a purchase order loan is disgraceful or only used by clients who are not reputable. This just isn’t the truth. There are people in a variety of different industries with different reputations and expertise that use these types of loans. If you need to build your business, it is one of the best options. 

Purchase Order Loans Are Difficult to Obtain

Many business people believe that it will take too long to get a purchase order loan. The truth is that your clients’ credit ratings and payment histories have to be assessed. The finance company does have to do its share of research. However, this type of research does not take too long. In fact, it may be done in a few days. You will have enough money to fulfill the orders quickly. This is in direct contrast to a bank loan that might take several months to complete.

Purchase Order Loans Have High Interest Rates

While purchase order financing does have slightly higher interest rates than traditional loans, they are affordable. Most businesses can afford them. In fact, you will still make a profit. Now, the problem is that some CPAs won’t calculate the interest properly. This will lead them to tell their clients that they are going to pay 50 percent in interest. The truth is that it is usually much lower than that. If there are high interest rates, it is usually for high-risk clients.

When it comes to purchase order financing there are a lot of myths. The truth is that there are a lot of businesses, big and small that benefit from this type of funding.