Purchase Order Financing

//Purchase Order Financing
Purchase Order Financing2016-10-14T00:09:19+00:00
  •  Purchase Order Financing – is a financial product that allows the client to receive a purchase order from a customer, present it to the purchase order financier, and in turn the financier will issue a Letter of Credit or put forth the cash necessary to the clients vendor(s) so as it cause for the vendor to produce and procure the materials, components, or products needed to fulfill the purchase order. 
    •  Upon fulfillment of the vendors obligations and terms outlined in the Letter of Credit, the vendor may present the LOC to his or her bank for complete payment in full. 
    •  Once the Purchase Order if fulfilled to the clients customer, the client will generate an invoice. At that time the financier will convert the relationship from purchase order financing to factoring, thereby factoring the receivable with between an 80% to 90% advance rate of the face value of the invoice. This will internally “pay off” the purchase order financing, convert the relationship to the lower cost factoring solution, and by whatever amount the 80 to 90% of the invoice is greater than the vendors costs, will provide that difference in available cash to the client.

  • ABC company receives a Purchase Order for $100,000 from Home Depot. 
  • ABC’s cost to it’s vendor is $50,000
  • Purchase Order is submitted to PO Financier
  • PO Financier issues an LOC to ABC’s vendor for $50,000
  • Vendor fulfills order, order is inspected and satisfactory to client
  • Vendor cashes is LOC and is paid in full
  • Order is delivered to Home Depot
  • Client invoices Home Depot for $100,000
  • Invoice is converted to factoring relationship with 80% advance rate providing for $80,000 available cash flow to client.
  • Financier internally pays themselves off the $50,000
  • There is still $30,000 available cash for the client, and $30,000 is wired to the client to use as they deem fit.
  • 30 days later Home Depot pays invoice for $100,000.
  • Payment is sent to financier, and financier pays off the $80,000 factored amount, leaving a $20,000 reserve balance for client.
  • Financier wires to client the $20,000 reserve, less the financiers fees.
    • Client is happy.
    • Vendor is happy.
    • Customer is happy.
           Purchase Order Financing allows companies to take on business they otherwise could not either afford to pay the vendor up front, or give vendors the comfort they need to know the client can and will pay them upon completion.         This product has allowed many companies to engage new order, clients and opportunities they otherwise could never dream of.
          Seize your opportunities today – Complete our online Purchase Order Financing Application at the link below:

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