What Are the Benefits of Purchase Order Financing?
Convert Invoices to Cash
Sell unpaid purchase orders to a lender, get cash right away.
Access Competitive Rates
Receive competitive offers through our 75+ lender marketplace.
Take On More Customers
Get funding to purchase more inventory and/or take on more customers.
We've Secured Over $1 Billion in Funding Through Our Exclusive Marketplace
Fast Financing to Fill Your Next Order
Don't let slow cash flow stop you from taking on new customers. Learn how you qualify for competitive rates and terms, even if your business is just getting started!
What Are the Terms and Rates of Purchase Order Loans?
Financing Amount Up to 90% of the PO
Flexible Terms Ongoing
Time to Fund 3-7 Days
How Can You Use Purchase Order Financing?
There are no restrictions— with the right purchase order financing company, you can use your capital to pursue any opportunity or overcome any challenge!
Buy new equipment or inventory, hire new staff, or prepare for seasonal changes.
Get extra working capital to manage payroll, bridge gaps in cash flow, or pay bills.
Expand or open a second location, take on more clients, or capitalize on bulk order discounts.
What is PO Financing?
Your customer's invoice is overdue, and you're still waiting on the payment. But, your supplier is waiting for payment, and you can't risk paying late or ruining your relationship. Regardless, your packaging, shipping, product and labor costs must be met.
Does this situation sound familiar?
Purchase order financing is a funding solution that helps businesses buy the inventory they need to complete customer orders. With purchase order financing, you can ensure your orders are fulfilled and that your customers are satisfied even when you don’t have the working capital readily available.
In order to take advantage of purchase order funding (also called invoice factoring), you first need to present proof of the delivery and acceptance of the goods, while invoicing your financier for the goods at an agreed-upon discount. Then, the lender invoices your buyer for the full amount, collecting the payment according to your agreed upon terms.
After receiving the payment, the balance is paid (less applicable administration fees and the cost of money used). The process for non-finished goods differs slightly, as it involves the seller taking possession of the goods in an unfinished state.
Purchase order funding is the ideal funding option for businesses that require the cash flow to fill orders, while avoiding a tarnished reputation in the process. It's also easier than bank financing, as it hinges on the creditworthiness and financial strength of the invoiced company, rather than your own.
The Purchase Order Financing process has never been so fast, simple and easy! All you need to do is sell your customer's purchase order in exchange for the capital you need.
Why National Business Capital?
- Flexible Terms
- Simple Process
- 90% Approval Rate
- No Real Estate Collateral Needed
How purchase order financing works
Purchase order financing is pretty straightforward. The entire process can be broken down into 5 simple steps. Take a look at how purchase order financing works.
Step 1: Receive an order
Your customer will submit an order and you’ll decide whether or not you have the cash flow at hand to fulfill it. If not, purchase order financing may be a good fit. Just make sure to have your supplier send you an invoice for the estimated cost for the order so you’ll know exactly how much funding you’ll need.
Step 2: Apply for purchase order financing
Contact your lender about your situation and to review purchase order financing options. Depending on your qualification requirements, you may be able to secure up to 100% of your supplier costs. If not, you may have to put down between 10% to 20% of your own funds.
Step 3: Your supplier fulfills the order
Your purchase order financing company will pay your supplier who will then fulfill your customer’s order. In most cases, the supplier will also deliver the products directly to the customer.
Step 4: Your customer pays the purchase order financing company
Your customer will pay the purchase order financing company directly for the goods they receive. Keep in mind that the faster your customers pays, the faster you’ll get your share of the profits in return.
Step 5: The purchase order financing company pays you
Once the purchase order finance company receives the payment, they’ll deduct the fees and forward you the remaining balance.
Advantages and disadvantages of purchase order financing
Purchase order financing can offer a number of different benefits. Most significantly, this type of financing allows you to fulfill your customer’s orders even when you’re dealing with cash flow issues.
Purchase order financing is a relatively easy form of financing to obtain and tends to work fast. There are less requirements and higher approval rates. Even if you don’t have great credit or you’re a relatively younger business, you should be able to access this funding type.
Purchase order financing is also typically unsecured. Meaning you won’t have to put up your assets as collateral in order to get approved for this financing type. In fact, if the lender is the typically the party that typically absorbs the risk if your customer doesn’t pay for the products.
Purchase order financing does feature some drawbacks that may not make it a good fit for every scenario. Most notably, purchase order financing has higher fees compared to other business loans.
Purchase order financing is also designed to be a fast, short-term solution and may not be ideal for longer-term funding needs. If you continuously struggle with cash flow issues or you’re looking to finance a more extensive project – you may be better off with a business loan or line of credit.
When to use purchase order financing
Purchase order financing can be a good fit for any business that needs to fulfill a customer order but is lacking the necessary cash flow. Purchase order financing is particularly common among wholesalers, distributors, importers and exporters, retailers, government contractors, and more.
Other businesses that may seek out purchase order financing include:
- Startups and young businesses
- Businesses with low credit
- Businesses struggling with tight cash flow
- Business with seasonal sales cycles
- Businesses growing fast
How to qualify for purchase order financing
Qualifying for purchase order financing may actually be easier than qualifying for other types of business loans. The process also tends to be pretty straightforward. At a glance, you should expect to show that:
- Your business sells finished goods
- Your customers are creditworthy
- Your suppliers have a solid reputation
- Your profit margins are at least 15% to 20%
Some lenders will also have order minimum requirements. This will usually be around $20,000 but can vary depending on the lender you work with.
10 Reasons Why National Business Capital Offers the Best Purchase Order Financing
- 2-3 Years Tax Return
- 2-3 years Financials
- 3-6 Months Bank Statements
- 1 Year Tax Return
- 1 year Financials
- 3 Months Bank Statements
- No Tax Returns Required
- Paper Intensive
- One page - One Minute
|Number of Lenders||1||1||+75|
|Service Level||Processor||Programmatic||Personal Advisor|
|Speed to Funding||Months||Days/Weeks||Hours/Days|
|Collateral Requirements||Always||Sometimes Required||Not Necessary|
|Business Profitability||Always||Sometimes Required||Not Necessary|
|Credit Score||680+FICO||600+FICO||No Minimum FICO|
|Credit Check||Hard Pull||Hard Pull||Soft Pull|
Why Choose National Business Capital for Purchase Order Financing?
Better Terms. Faster Funding. Easier Process.
National Business Capital is the #1 FinTech marketplace offering small business loans and services. Harnessing the power of smart technology and even smarter people, we’ve streamlined the approval process to secure over $1 billion in financing for small business owners to date.
Our expert Business Financing Advisors work within our 75+ Lender Marketplace in real time to give you easy access to the best low-interest SBA loans, short and long-term loans and business lines of credit, as well as a full suite of revenue-driving business services.
We strengthen local communities one small business loan at a time. For every deal we fund, we donate 10 meals to Feeding America!