Purchase Order (PO) Factoring & Financing | Business Factors
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Purchase Order Financing

Deliver More Than Promises, Meet Demands With Ease
Say yes to big contracts that exceed your normal capacity and seize growth opportunities. Purchase order financing lets you fulfill large customer orders and keep your supply chain moving, even when capital is tight.
UNLOCK YOUR NEXT SHIPMENT

Approximately 27% of small businesses couldn’t obtain the funding they needed from traditional sources. With the lending environment becoming increasingly challenging, purchase order funding is stepping in to fill the gap.

Purchase order (PO) financing allows resellers with limited cash flow to pay their suppliers to fulfill a large order. The PO financing company pays the supplier to deliver the goods to the end customer, who then pays the PO company directly. The financing company deducts its fees and sends the rest to the reseller.

With the right support from Business Factors & Finance, fulfilling a high-volume order is possible and profitable. You can take on larger contracts, strengthen supplier relationships and build client trust.

How Does Purchase Order Financing Work?

A Simple Way To Keep Orders Moving

PPO financing can be structured in many different ways, depending on:

  • The financing companies involved
  • The industry and the location of the buyers, resellers and suppliers
  • The timing of the transaction, among other factors.

The basic premise of any PO transaction is that a reseller does not have the funds to fulfill a customer’s order.

Some refer to this as purchase order lending, though the structure typically doesn’t involve taking on debt.

BACK YOUR NEXT BIG ORDER

Here’s what purchase order financing for small businesses, mid-sized operations and growing suppliers typically looks like:

  • Submit the Purchase Order

    Once you receive a confirmed purchase order from your customer, share the details with Business Factors & Finance.

  • Approval and Supplier Payment

    After verifying the PO and assessing your customer’s credit strength, we either pay your supplier directly or issue a letter of credit to finance purchase order costs on your behalf.

  • Goods Are Delivered to Your Customer

    Your supplier ships the product directly to your customer. Once delivery is verified, the order is officially considered fulfilled.

  • Customer Payment and Final Disbursement

    The customer pays us directly based on the PO terms, typically within 30 to 90 days. After we deduct our fees and the amount advanced to your supplier, the remaining balance is forwarded to you.

Purchase Order Financing vs. Factoring: A Quick Overview

Understanding How and When Each Option Fits

Purchase order funding can be used to finance an upcoming order. After an order has been fulfilled, the business can sell the invoices for the fulfilled order at a discount to a factoring company or a bank.

This is another cash flow solution called invoice factoring, where a business can obtain working capital in as little as 24 to 48 hours. For more information, visit our Small Business Factoring or Invoice Factoring pages.

Here’s a summary of how the two compare:

PO Financing
Invoice Factoring
When It’s Used
Before production or shipment (when you need to pay your supplier for goods based on a purchase order)
After delivery (when you’ve already invoiced the customer but haven’t been paid yet)
Trigger Event
A confirmed purchase order from a customer
A completed invoice issued to your customer
Who Gets Paid
The financier pays your supplier directly to fulfill the order
The factor advances cash to you upfront and collects directly from the customer
Position in the Sales Cycle
Front end (before delivery)
Back end (after delivery and invoicing)
Best For
Businesses needing capital to fund supplier costs on large or recurring orders
Businesses needing fast cash for delivered work or goods, especially with long customer payment terms

Fulfilling Large Orders Without Tying Up Capital

Landing a large order can open new doors. But without the cash to pay your supplier, you risk losing the opportunity.

Say you’re a U.S.-based chemical reseller with a $50,000 purchase order from an international oil company. Your supplier, based in Canada, requires $35,000 upfront.

This is your first time working together. The customer expects delivery within 90 days, and future contracts are on the line.

Here’s how purchase order financing and invoice factoring can impact your cash flow.

Example 1 PO Financing

You apply for purchase order financing to cover the $35,000 needed to pay your supplier. Because it’s an international, first-time transaction, the financier issues a letter of credit to the supplier’s bank, guaranteeing payment once the goods are shipped.

After delivery, the customer pays $50,000 directly to the PO financier. They deduct the supplier payment and a 10% fee ($1,500) based on standard purchase order financing rates, then forward the remaining $13,500 to you as profit.

Example 2 Invoice Factoring

If you don’t want to wait 90 days for payment, you can also factor the invoice once the order is delivered. The factoring company pays most of the $50,000 upfront to the PO financier, who forwards the funds to you after deducting fees.

While invoice factoring isn’t required, it can be used alongside PO financing to access your remaining profit sooner. This frees up working capital so you can take on your next order even faster.

Which Transactions Are Eligible?

The criteria will vary among purchase order financing companies. In general, most look for transactions that meet the following requirements:

  • A recurring transaction of at least $100,000

    Financing companies tend to avoid one-off or low-value deals to minimize their risk. Smaller transactions require as much due diligence as bigger ones, so PO companies set a threshold amount.

  • Non-cancelable with a minimum margin of 30%.

    The margin requirement ensures that after paying the PO company’s fees (and possibly a factoring company’s fees as well), the reseller still makes a profit. No financing company wants to be responsible for putting another company in the red.

  • Not a guaranteed or consignment sale.

    Goods purchased under these arrangements can be returned, which can eat into the reseller’s and PO financing company’s margins.

  • Finished goods only.

    Many providers will only finance the purchase of completed products. Orders involving raw materials, manufacturing or custom work are typically excluded due to increased risk.

  • Domestic, unless the company accepts international transactions.

    Some companies only underwrite domestic deals, while others are open to working with overseas businesses. Contact one of our executives today to discover the best alternative to finance your business.

What Does a PO Financing Company Evaluate in a Transaction?

To assess eligibility, PO financing companies typically evaluate the credit strength and track record of all key parties:

  • The end customer.

    The credit profile of the final client is important since it is the party paying for the transaction. Purchase order financing companies will likely run a credit check on the end customer.

  • The supplier.

    The financier will evaluate the suppliers’ credit profiles. It helps if they are well-established companies with a good track record, no recent bankruptcies and no history of serious litigation. Some PO funding companies will not finance a transaction if the supplier is experiencing financial problems or needs an advance to fund production.

  • The reseller.

    Your financial standing matters, especially your legal and tax history. While the transaction is primarily underwritten based on the customer’s credit, you may still be asked for a personal guarantee, particularly if the business is new or lacks a transaction history.
GET FUNDED TO FULFILL

Why Your Business Needs PO Financing

Deliver More Without Stretching Your Cash

Growth often depends on your ability to deliver, especially when a customer places an order that exceeds your current capacity.

Purchase order financing helps you cover supplier costs tied to that order, so production moves forward without drawing from your operating cash or relying on traditional loans.

It keeps your supply chain active, even when payment terms are long or vendor demands are strict. With proper funding, you can take on more volume, protect your cash position and confidently fulfill high-value contracts.

If you’re ready to grow but held back by supplier constraints, this is your next move.

SECURE YOUR SUPPLIER PAYMENT

Industries That Benefit From Purchase Order Funding

A Flexible Solution Across Sectors

Supply chains don’t wait for bank approvals. Across industries, businesses explore purchase order finance options to act on confirmed orders, even when upfront costs would usually hold them back.

The search for the best purchase order financing company often starts with understanding how the model supports different sectors, like the following:

Wholesalers

When large retail orders come in, wholesalers must often purchase inventory quickly. PO financing enables them to move volume without freezing up their working capital.

Manufacturers

Manufacturers use PO funding to secure raw materials or finished goods tied to a customer order. It allows production to move forward without waiting on internal cash or delayed receivables.

Distributors

With tight delivery schedules, distributors often face timing challenges. PO financing gives them the working capital to meet customer demand while protecting day-to-day operations.

Government Contractors

Government purchase order financing allows contractors to take on large public-sector projects without absorbing the upfront costs themselves. It creates a path to deliver on federal or municipal contracts while preserving internal cash flow.

Staffing and Payroll Agencies

Agencies use PO financing to meet payroll obligations tied to new or growing client accounts. It provides funding based on secured contracts, so wages are paid on time without dipping into reserves.

Technology and IT Services

In IT, large contracts often involve hardware procurement and third-party services. PO financing gives tech firms the flexibility to meet client needs without putting pressure on vendor relationships or internal budgets.

Which Working Capital Fits Your Business Needs?

Both purchase order financing and invoice factoring can improve cash flow, but they serve different needs depending on where you are in the transaction.

When To Use Purchase Order Funding

When To Use Invoice Factoring

Use purchase order financing when you’ve received a confirmed purchase order from a creditworthy customer but don’t have the upfront capital to pay your supplier. It’s best suited for businesses that need funds to produce or deliver goods before they can invoice.

Benefits of Purchase Order Funding

  • Covers supplier costs tied to a confirmed customer order
  • Helps you take on larger contracts without drawing from internal cash
  • Does not add long-term debt
  • Enables you to meet customer deadlines with confidence
  • Supports first-time or cross-border supplier relationships

Invoice factoring comes into play after the goods or services have been delivered and invoiced. If you’re waiting 30, 60 or 90 days for payment and want to access those funds sooner, factoring helps turn accounts receivable into working capital.

Benefits of Invoice Factoring

  • Speeds up access to cash after invoicing
  • Improves cash flow while waiting on customer payment
  • Reduces the burden of collections
  • Offers non-recourse options that protect against credit loss
  • Flexible enough for one-time or recurring use through spot factoring

Turn Big Orders Into Bigger Wins

You’ve secured the order. Don’t lose it waiting on capital. With purchase order financing from Business Factors & Finance, you can pay suppliers, fulfill large contracts and grow without adding debt or slowing down operations.

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FAQs

  • Who pays the supplier in a PO financing deal?

    The PO financing company pays your supplier directly or through a letter of credit. Once the goods are delivered and the customer pays, the financier deducts its fees and sends you the remaining profit.

  • When should a reseller start the PO financing process?

    If a reseller thinks they might need PO financing, it is best to start the process as early as possible. A running joke in the financing industry is that a business should look for PO financing before it needs it.

    This is because in many cases, PO financing is done for complex and often cross-border transactions. Due diligence and structuring for such deals can take some time.

  • Can PO funding be combined with invoice factoring?

    Yes. After the goods are delivered, you can factor the invoice to access your profit faster. Many businesses use both services together to cover supplier costs and improve cash flow after fulfillment.

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