Purchase Order Financing
With purchase order financing, also known as inventory financing or PO funding, your business receives a short-term line of credit to pay your vendors upfront for products or inventory so you don’t have to drain your available working capital. The products or inventory then serve as collateral for the financing. This type of credit facility allows a company to purchase goods from a supplier or fund manufacturing of product to complete an order to a creditworthy customer. The order may be for finished goods that are acquired from a domestic or foreign supplier and then delivered to the ultimate customer. The order may also be for goods that require some amount of manufacturing or repackaging before delivery to the ultimate customer.
Purchase order financing is particularly suited to businesses that receive a sudden large order, or those that need to pay their vendors within a short payment cycle. PO financing can also be used to help seasonal businesses smooth out their cash flow and take advantage of the savings associated with bulk inventory purchases. Clients that most often utilizing purchase order financing are distributors, wholesalers, product designers using third party manufactures as well as manufactures themselves who have strong financials and experience in the manufacturing of the product.