PO Financing
Purchase order financing is ideal for distributors and wholesalers who have large purchase orders they can’t fill due to lack of funds. The PO finance company funds or guarantees payment to your manufacturer or supplier on your behalf so you fulfill the order for your customer. The customer invoices are typically handled as an invoice factoring transaction.
Invoice Factoring
Invoice factoring usually occurs with purchase order financing. The PO finance company purchases your customer’s invoice, collects the invoice amount and sends you the remaining profit.
Minimizing Risk
Purchase order financing rates are based on the credit-worthiness of your customers, the reputation of your suppliers, the risk of the transactions, and your experience in the industry.
Business Requirements
Purchase order financing companies often require that you have at least 20% gross profit margin in your order. Purchase orders must be noncancellable and have no consignment or guaranteed sale terms.
Factoring Companies
Many factoring companies offer purchase order financing as an add-on service for clients that already factor with them. Due to its technical and risky nature, PO financing requires special expertise.
