Purchase Order Financing

What Is Purchase Order Financing?

Purchase Order Financing provides funding to fulfill large customer orders when you do not have the cash to pay suppliers upfront.

Key Features

• PO Funding: Get cash to pay suppliers for large orders.
• No Collateral on Inventory: The purchase order itself serves as collateral.
• Supplier Payment: The finance company pays your supplier directly.
• Order Fulfillment: Complete the order and deliver to your customer.
• Repayment on Completion: Repay when your customer pays for the order.

How Does Purchase Order Financing Work?

When you receive a large purchase order but lack the cash to fulfill it, a PO financing company pays your supplier directly. The supplier ships the goods, you deliver to your customer, and when the customer pays, the financing company takes their fee and sends you the remaining balance.

Benefits

• Fulfill large orders without cash reserves
• Supplier paid directly by finance company
• No inventory collateral needed
• Grow your business with larger orders
• Repay only when customer pays

Pros and Cons

Pros

• Enables large order fulfillment
• No need for cash reserves
• Supplier paid directly
• Scale your order volume

Cons

• Fees reduce profit margins on orders
• Requires creditworthy customers
• Only works with confirmed purchase orders

Who Is Purchase Order Financing Best For?

Businesses that receive large orders but lack the working capital to pay suppliers upfront.

How to Use

Submit your purchase order to the financing company. They pay the supplier and you fulfill the order.

Frequently Asked Questions

What types of orders qualify? Most PO financing works with physical goods and creditworthy customers.

How much does it cost? Fees typically range from 1 to 5 percent of the PO value per month.

Individual results may vary.