Purchase Order Financing

By Youri Moskovic
November 21, 2022

Purchase Order Financing, well on the surface it sounds simple and for the most part it is, but its essential to understand the steps and commitment you are making when beginning this process.

Let’s start with the basics, what is PO financing?

An advance from a creditor that pays your suppliers for goods that you are selling or distributing.

A lot of businesses opt for PO financing because you can grow your business without needing to take on debt with a traditional financial institution or by selling equity. You can finance up to 100% of purchase order costs.

Who gets involved?

  • Borrower - the business seeking financing
  • PO financing company - the business fulfilling the needs of the borrower by evaluating their purchase order and providing the supplier with funding
  • Supplier - they will be providing the goods that the borrower will sell. They are paid directly by the PO financing company.
  • Customer - this group is the customers of the borrower and the final recipient of the goods ordered.

Is PO financing right for me?

There are critical moments in a business’s trajectory where you have to start planning those next big steps to reach your goals. Growing your business will often evolve a cash injection or financial support and PO financing will often fit the bill. If you aren’t sure here are a number of circumstances when PO financing is the right choice:

  • A spike in demand for your product
  • Startup seeking growth fuel
  • Launching a new product
  • Diversify points of sales
  • Pay suppliers early
  • Negotiate payment terms

Choosing the right PO Financing provider?

Evaluation goes both ways and you want to make sure that the company who will be providing this support is reliable, so look into the following:

  • What is the PO financing model, pricing, and repayment period
  • The level of information they need from me, my business, and my suppliers
  • How long they take to complete a transaction
  • What collaterals they are asking for (if any!)
  • Do they have anything else to offer eg. a software to better manage my inventory

Feel free to reach out if you’re keen to learn more about PO financing.

Ready to manage your inventory
without ripping your hair out ?