How Purchase Order Funding Works

When a business finds itself in the position of not being able to promptly fill a customer's purchase order, it can be in real danger of losing those orders and the potential profit they represent. Worse yet is the potential loss of any future orders from that customer.

Since Money Doesn't Grow on Trees....

The Solution is Purchase Order Funding

The Funding Process

Funds Advanced - funds will be advance to your vendor to fill the purchase order. The funds will not be wired into your account, but instead will be paid directly to your vendor to cover the direct costs related to filling the order.

Order is Filled - the product is delivered and an invoice is created. The invoice needs to be updated to reflect the finance company's PO Box in the remittance field.

Fund Invoice - as soon as the purchase order is filled and an invoice can be created, the finance company will use the invoice to retire the existing purchase order funding. As with receivable funding, the finance company will usually advance 70%-90% of the total invoice amount with any overages wired into your account.

For example, assume the finance company advances 80% of the invoice, but the purchase order funding resulted in 60% of the invoice amount, you would receive 20% of the invoice amount, the difference between the 80% advance and the amount needed to retire the purchase order funding.

Payment Received - when the invoice is actually paid by your customer, the remaining reserve amount will be wired into your account less the predetermined discount fee. The reserve is the remaining 10%-30% that was not advanced in the first funding.

Appropriate Businesses for Purchase Order Funding

Purchase Order Financing is available to virtually all industry segments, with the explicit exception of construction. Some of the best candidates for purchase order funding are listed below:

Wholesalers, distributors, importers and exporters that purchase goods for resale are prime candidates.
Clients with a high profit margin
Clients with non-cancelable purchase orders
Clients with strong, creditworthy customers and suppliers
Growing Businesses
Businesses that experience seasonal surges
Businesses that occasionally have unusually larger PO’s.

Business Not Appropriate for Purchase Order Funding

Construction companies
Insolvent companies
Start-Up Manufacturers
Service Oriented Companies

Additional Questions???

Please Give Us A Call