Purchase Order (PO) Financing Explained
Purchase order financing is a great financing option for businesses that want to accept large orders from customers but don’t have the funds or the inventory on hand to fulfill the order.
Essentially, POs act as a contract between the business and their customer in which the customer promises to pay the business after the order is delivered.
The benefits of PO Financing
- Grow sales without being limited by existing capital
- Make larger profits by fulfilling larger orders
- Smooth out your cash flow
- Gain a competitive advantage
- Free up cash for other important expenses
How PO Financing Works
There are several parties involved in the transaction including you, your customer, your supplier, and the financing partner (VendorPayment.com in this case). Below is a simplified overview of the steps involved in PO financing.
- Your customer provides you a purchase order
- VP verifies the order and provides financing for up to 100% of the inventory cost
- VP issues your overseas or domestic supplier a letter of credit or makes payments to the supplier on your behalf.
- Supplier ships the goods to your customer.
- Customer pays VP
- VP then sends you the profit minus a small financing fee
Here’s an infographic that shows how purchase order financing works:
How VendorPayment Can Help You With PO Financing
VendorPayment.com has many years of experience serving the capital needs of federal, state and municipal vendors in the U.S. Our PO financing solution offers flexibility and scalability with financing amounts as low as $25,000 and no maximum loan amount for creditworthy customers.
- Businesses with a purchase order in excess of $25,000
- Demonstrated ability to deliver on POs
- Businesses with creditworthy clients
Why Finance Your Purchase Orders With VendorPayment?
- Fees as low as 3% for domestic suppliers and 5% for foreign suppliers
- No cap on financed amount
- PO and Invoice Financing all under one roof
- Transparent process: no hidden fees
- Ability to issue letters of credit
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