Purchase Order Finance

Purchase order finance is a powerful and extremely flexible method of financing the purchase or production of goods to meet large, out of the norm orders from creditworthy retailers. Although most often associated with cross-border transactions and Pacific Rim contract manufacturing, purchase order finance is equally appropriate for solely domestic transactions as well.

How Purchase Order Finance Works

Purchase order finance typically is required when a very large order for goods is received from a large retailer such as a big-box store. The order often exceeds the distributor's or manufacturer's ability to buy the raw materials or components to meet the order and traditional bank financing is not an option.

For your business to qualify, our purchase order finance providers will look at...

Order Size: The size of the purchase order should be for $50,000 or more in goods (wholesale)
Factory: Wherever located, the factoring must be a "legal" factory with a history of successfully producing the product.
Firm Order: The purchase order must be a firm order without conditions which could negate the transaction once the goods are delivered.
Customer: The retail customer must be creditworthy.
Take Out: There must be a provision in place to "take out" the purchase order finance company once the goods have been delivered. (This is usually accomplished through factoring of the invoice once the goods have been shipped and received.)

Goods Only. Not Available for Service Contractors in Need of Mobilization Funds

Purchase order finance is customarily only available for financing the manufacture or delivery of goods. It is not available for nor can it be used as a source of "mobilization" money to perform a service contract. It additionally cannot be used to finance inventory. There must be a firm order for the goods where payment will be received within 90 days or less once the goods are delivered.

Find Out More

One of the best ways to further explore purchase order finance and to see if its right for you and your business is to request our FREE booklet, "When Banks Say NO!...The Small Business Guide to Factoring." Its FREE, from the Small Business Finance Center. (click here to order)