Financing guide
Purchase order financing
Won an order bigger than your cash on hand? Purchase order financing lets a funding partner pay your supplier so you can deliver the order — without turning it down or draining your working capital.
See if you qualifyHow purchase order financing works
The details vary by funding partner, but most PO financing follows the same basic path.
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01
You receive a confirmed order
A creditworthy business or government customer sends you a purchase order for goods you need a supplier to produce or provide.
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02
A funding partner reviews the deal
The partner looks at the order, your customer, your supplier, and your margin. If it approves, it pays your supplier directly, often by direct payment or a letter of credit.
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03
Your supplier fills the order
The goods are produced and delivered to your customer, so you keep the relationship and the sale.
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04
Your customer pays, and you keep the margin
When your customer pays the invoice, the funding partner is repaid along with its fees, and the remainder goes to you. Some businesses pair this step with invoice factoring to get paid sooner.
Is it the right fit?
Often a good fit
- Distributors, wholesalers, resellers, and importers selling physical goods
- Government contractors with a confirmed award or order
- Orders from creditworthy business or government customers
- Deals with enough margin to cover financing costs
- A reliable supplier with a track record of delivering
Usually not the right tool
- Service businesses with no physical goods to deliver
- Sales to individual consumers rather than businesses
- Very thin margins that financing costs would erase
- General cash-flow needs with no specific order behind them (see working capital)
What funding partners look at
- Your customer. Their creditworthiness and payment history, since their payment repays the financing.
- The order. A signed purchase order with clear quantities, pricing, and delivery terms.
- Your supplier. Their ability to deliver on time and to specification.
- Your margin. Whether the deal still makes sense after fees.
- Your experience. A history of fulfilling similar orders helps.
What it costs
Fees vary by funding partner, deal size, and how long your customer takes to pay. Your funding partner will set out its fees and terms before you agree to anything. Compare the total cost against your margin on the order, and consider asking your own advisor to review the agreement.
We don’t charge you for a referral. See our disclosures for how we’re paid.
Purchase order financing FAQ
Is purchase order financing a loan?
Structures vary by funding partner. Many treat it as a transaction-based advance that is repaid from your customer’s payment, rather than a conventional term loan. Your funding partner will explain how its agreement is structured before you sign.
Do I need good credit to qualify?
Because repayment comes from your customer’s payment, funding partners often focus more on your customer and the transaction than on your own credit history. Each partner sets its own requirements, and some will review your credit as part of their process.
How is PO financing different from invoice factoring?
PO financing funds the order before it is delivered, by paying your supplier. Invoice factoring funds you after delivery, against the invoice you send your customer. The two are often used together: PO financing to fill the order, then factoring to bridge the wait for payment.
How much of an order can be financed?
It depends on the funding partner and the deal, including your supplier costs and your margin. PO financing is generally designed to cover what you owe your supplier rather than the full value of the order.
Have a purchase order to fund?
Two minutes of questions, then we match you with funding partners suited to your deal.
See if you qualifyPurchase Order Lending is a referral service, not a lender. We may be compensated by funding partners. Terms, rates, and approval are set solely by the funding partner. This page is general information, not financial advice.