Purchase Order Financing
Purchase order financing is a working capital product where the funder advances capital to fulfill specific customer purchase orders — typically funding inventory and supplier payments against the purchase order receivable — distinct from general working capital MCA.
Why This Matters
PO financing addresses a specific working capital need: ability to fulfill large customer orders without depleting operating capital. The mechanics: merchant receives qualifying customer purchase order, funder advances 70-90% of supplier costs to enable order fulfillment, customer pays merchant upon delivery, merchant repays funder from received payment. PO financing prices typically 2-5% per month of advance amount — high relative to traditional financing but justified for short-cycle (30-90 day) capital deployment. PO financing complements MCA in many merchant capital structures rather than competing directly.
Frequently Asked Questions
Frequently Asked Questions
When does PO financing make economic sense?
When merchant has specific large customer purchase order requiring capital to fulfill, customer creditworthiness is strong (PO financing depends on customer payment), and short payment cycle makes the high per-transaction cost economically rational. Best fits import/distribution, manufacturing, and B2B services with large project-based orders.
How does PO financing differ from invoice factoring?
PO financing advances capital before product delivery (financing the fulfillment); invoice factoring advances capital after product delivery (financing the receivable). Both serve B2B working capital needs but at different points in the order-to-payment cycle.