What Is Purchase Order Finance?

If your business lands a big order, but you don’t have cash to make it happen, the answer may be Purchase Order Finance.

A financier will lend against a verified purchase order, so your suppliers can be paid upfront and you can obtain the goods your customers require.

Cash deposit

The financier will either issue a letter of credit to your supplier, or in some cases pay a cash deposit.

Your supplier will be required to ship the goods directly to your end customer.  The customer pays the financier and you receive the balance after the advance and fees have been deducted.

Blue chip

Finance companies generally require the purchase order to have been placed by a large blue chip type of customer and be for finished goods.

Profit

Your profit margin should also be strong – at least 30%.

This product is not for companies which want to obtain raw materials for work in progress or products that are incomplete.

Typical customers for this type of finance are distributors, manufacturers, importers and exporters.