Purchase Order Financing

 

Purchase Order Financing, or PO financing, is used to pay your suppliers, laborers, or other intermediaries for goods or services to generate additional sales. A company will need PO financing when:

 

You need expertise to handle the financing
You need additional working capital
You need a quick response to an immediate sales need
You don’t want to incur additional credit risk, be it foreign or domestic
You want your buyers and sellers to not know each other
You want the opportunity to make additional profit

There are the three steps for purchase order financing:

Get a purchase order from your customer.

Find a reliable supplier of your products.

Place an order to that supplier.

 

P.O. Financing falls into two types: Finished Goods | Non-Finished Goods

 

Finished Goods refers to transactions where the goods are never touched by you. Usually these goods go directly from your supplier to your buyer. You never take direct possession. Finished Goods are easier to finance than Non-Finished Goods.

 

Non-Finished Goods are when you the seller take possession of the goods either in a raw state (such as yarn to make blue jeans) or a semi finished state (partially sewn blue jeans). In either case you must take possession of the product.