Question 1

What types of purchase orders qualify for financing?

Accepted Answer

Qualifying POs come from creditworthy customers (corporations, government entities, established retailers), involve finished goods (not services), have healthy gross margins (typically 20%+), and are non-cancellable with firm pricing and clear delivery terms. Not eligible: service orders, orders from customers with poor credit, orders with sale or return clauses, or low-margin products that cannot absorb financing fees. If financing against existing inventory rather than a new PO, inventory financing may be more appropriate.

Question 2

How much funding can I get against a purchase order?

Accepted Answer

PO financing funds 70–100% of your supplier costs, not the full PO value. Example: on a $200K PO with $120K in supplier costs, you could get $84K–$120K in funding. Advance rates improve with stronger customer credit, simpler fulfillment, established lender relationships, and larger transaction volume. First-time borrowers start at the lower end.

Question 3

How does repayment work?

Accepted Answer

PO financing is self-liquidating — you fulfill the order, invoice the customer with payment directed to the lender, the customer pays the lender directly, and the lender deducts the advance plus fees and remits your remaining balance. There are no fixed monthly payments. If the customer fails to pay, you are typically responsible (recourse structure). Balance sheet treatment depends on structure — a secured loan creates a liability; a receivable purchase may be off-balance-sheet. Consult your accountant.

Question 4

What does PO financing cost?

Accepted Answer

Fees run 2–5% of the funded amount per 30-day period (on supplier costs, not the full PO value). Domestic: 1.5–3.5% per 30 days. International: 3–6% per 30 days. Additional costs include due diligence fees, wire/transfer fees, and an annual facility fee if applicable. The ROI frame matters most — a 3% fee on a 40% gross margin order still leaves 37% net margin on revenue you would otherwise miss entirely.

Question 5

How long does approval take?

Accepted Answer

First-time applicants: 7–14 business days total — 1–2 days for application review, 3–7 days for due diligence on customer and supplier, 1–2 days for underwriting and term sheet, 1–3 days for documentation and funding. Established facilities with repeat customers fund in 24–48 hours. Pre-approved limits are common for repeat customers.

Question 6

PO financing vs. invoice factoring — which do I need?

Accepted Answer

PO financing funds before fulfillment — the lender pays your supplier so you can produce or procure the goods when you have a PO but no invoice yet. Invoice factoring funds after fulfillment — you have shipped and invoiced but need cash before your customer's payment terms expire. Many lenders combine both: PO financing covers supplier costs, then factoring converts the resulting invoice to cash after delivery, covering the full order-to-cash cycle.

Question 7

Will my customer and supplier know I am using PO financing?

Accepted Answer

Generally both will know. Suppliers know because the lender pays them directly — this is usually a positive since they receive guaranteed, fast payment. Customers may receive a notice of assignment directing payment to the lender, which many large buyers are familiar with. Discuss notification requirements upfront. If customer confidentiality matters, A/R financing after fulfillment can keep the lender invisible.

Feature	PO Financing	A/R Financing	Invoice Factoring	Line of Credit
What Gets Funded	Supplier costs (pre-fulfillment)	Outstanding invoices	Outstanding invoices (sold)	General working capital
Timing	Before you fulfill	After you invoice	After you invoice	Anytime (revolving)
Advance Rate	70–100% of supplier costs	70–95% of invoice value	70–90% of invoice value	Up to approved limit
Typical Cost	2–5% per 30 days	1–3% per 30 days	1.5–4% per 30 days	8–20% APR
Qualification Driver	Customer's creditworthiness	Customer's creditworthiness	Customer's creditworthiness	Your credit + financials
Repayment	Self-liquidating (customer pays)	Self-liquidating (revolving)	Factor collects from customer	Monthly draws/payments
Best For	Large orders beyond working capital	Slow-paying B2B customers	Fast cash, weak own credit	Ongoing working capital

Item	Amount
Purchase Order Value	$200,000
Supplier Cost (COGS)	$120,000
Your Working Capital Contributed	$30,000
PO Financing Amount	$90,000
PO Financing Fee (3% on $90K)	−$2,700
Net Profit After Financing	$77,300

Never Turn Down a Big Order

How Purchase Order Financing Works

Receive PO from Creditworthy Customer

Apply & Submit PO + Supplier Details

Lender Pays Your Supplier Directly

Fulfill & Ship the Order

Customer Pays → You Keep the Profit

PO Financing vs. Other Options

Types of PO Financing

Real-World Example

Without PO Financing

With PO Financing

Benefits & Considerations

Benefits

Considerations

Industry Applications

Wholesale Distribution

Manufacturing

Import / Export

Retail Suppliers (Big-Box Fulfillment)

Frequently Asked Questions

Ready to Fund Your Next Order?

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