Purchase Order Funding

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Purchase Order Finance is short term financial solution used to finance the purchase or manufacture of specific goods that have been pre-sold by the client to its creditworthy customers. When a business receives a purchase order that it cannot fill because it does not have the money to buy the goods ordered (or the parts it needs to manufacture the product), it may be able to get purchase order financing. Here is how it typically works:

A business has a valid and irrevocable purchase order, but lacks the funds to pay its suppliers. The suppliers will not grant payment terms, and the bank will not extend the amount of credit required to pay the suppliers. Under a purchase order funding agreement, the suppliers are paid directly (either cash or more commonly via a letter of credit) by a purchase order finance company.

Purchase order financing is designed for growing businesses with little access to working capital and/or poor cash flow. Generally, purchase order funding is available in virtually any industry. The type of business that qualifies is usually a producer, distributor, wholesaler, or reseller of manufactured products. In some cases restrictions may apply to start-ups and companies that do not yet have a visible business history / sales track record.

 

 

Click here to visit our FAQ section on PO Funding.