What is Purchase Order (PO) Financing?
Purchase order financing is a type of asset based financing. It is a short-term commercial finance option that provides capital to pay suppliers upfront so your company can fulfill an order for your customer. A combination of asset-based lenders (PO financing company and an A/R factoring company) finances the purchase of the raw material and the conversion of the PO into an accounts receivable invoice. The PO financing company is paid off by the accounts receivable factoring company when the PO is converted to an invoice. After the orders are filled, payment is made to the factor who then deducts its cost and fees and remits the balance to the company (sometimes these are one in the same company). The total cost of funds will range based on the length of time it takes to convert the order to a paid invoice.
Who uses it and why?
The type of business that qualifies is usually a producer, distributor, wholesaler or reseller of manufactured products who are in need of short term working capital to pay vendors. If your company finally landed that dream order, but there’s not access to the capital needed to make it happen – you should consider purchase order financing. Feel free to give us a call to discuss your opportunity.We are relationship focused and operate from a basis of respect, trust and professionalism. Call us toll free at (855) 585-7755 to discuss your opportunity to grow your business and we will work to develop an opportunity to make it happen.