You Won an Order You Cannot Afford to Fill
Purchase order financing pays your supplier directly so you can fill a confirmed order that is larger than your working capital. The funder issues payment or a letter of credit to the supplier against the purchase order, the goods ship to your customer, and the funder is repaid out of the resulting invoice — usually by rolling straight into invoice factoring. As of 2026, PO financing covers 70%-100% of supplier cost on orders from $250K to $10MM+, prices at roughly 2%-4% per 30 days of the funded amount, and closes in 5-15 business days once the supplier and end customer check out. The gate is gross margin: the transaction generally needs 20%-25% or better to absorb the cost, and the funder cares as much about your customer credit and your supplier reliability as about your financials. It only works for finished goods that ship — not for services, not for labor, and not for work you manufacture yourself from raw inputs.
A few questions, no credit pull, no obligation. Or call 770-820-7409.
Where this fits best
Our sweet spot is $5MM to $50MM in revenue on asks between $250K and $5MM. We work meaningfully smaller and meaningfully larger — we have closed $250K factoring lines and $50MM facilities in the same year. What usually decides fit is your credit, your existing debt, and whether the structure works at all. Size is the last thing we look at, not the first.
- •Sweet spot is $5MM-$50MM in annual revenue, though PO financing works for a smaller company with one very large order — here the size of the order matters more than the size of the company
- •A confirmed, non-cancellable purchase order from a creditworthy commercial or government customer
- •Gross margin of roughly 20%-25% or better on the transaction
- •Finished goods, drop-shipped or resold — the supplier ships a completed product
- •A supplier with a real track record, ideally one who has delivered for you before
What is actually going on
This is the good problem, and it is still a problem. A customer you have been chasing for two years sends a purchase order that is three times anything you have filled before. The margin is real. The customer is good. And your supplier wants 50% down before production starts, which is more cash than the business has, so the order that should be the best thing that happened this year turns into a decision about whether to decline it or take money you should not take. What makes it hard is that the collateral does not exist yet. There is no invoice to factor, because nothing has shipped. There is no inventory to borrow against, because nothing has been made. A bank looks at the balance sheet and sees a company too small for the order, which is exactly what it is — that is the point of the financing. The asset being lent against is the purchase order itself and the credit of the company that issued it. The usual mistake at this moment is to reach for the fastest money instead of the right money. An advance sized against trailing revenue will not cover a step-change order, and the daily repayment starts before the goods have even shipped, which means the company is servicing debt out of cash flow that is 90 days from existing. Companies fail on good orders more often than on bad ones, and this is usually how. The other honest constraint is margin. PO financing costs roughly 2%-4% per 30 days, and a transaction with a 60-day cycle from supplier payment to customer collection carries perhaps 5%-8% of cost. On a 30% gross margin that is a good trade. On a 12% margin it is most of the profit, and the right answer is to say so before anyone pays for diligence.
How it works
The funder underwrites your customer, not you
The primary credit question is whether the company that issued the PO will pay the resulting invoice. Your financials matter, but a thin balance sheet with a blue-chip or government customer on the other side is a normal PO financing profile rather than a disqualifier.
The supplier is vetted too
A funder is about to wire money to your vendor on the expectation that goods ship on time and to spec. Suppliers with a delivery history — especially ones who have delivered for you before — move a file forward. A new overseas supplier with no track record is the most common reason a PO deal stalls.
Payment goes to the supplier, never to you
The funder pays the supplier directly, or issues a letter of credit, covering 70%-100% of supplier cost. This is not a cash advance to your operating account, which is why it does not solve a general working capital shortage.
Goods ship, invoice is issued, factoring takes over
Once the order ships and you invoice, the receivable is factored and the factoring advance repays the PO funder. In practice the two facilities are usually arranged together at the start, which is far cleaner than trying to bolt factoring on after the goods are in transit.
You collect the residual
After the supplier cost, the PO financing fee, and the factoring fee, the remaining margin lands with you when your customer pays. This is why the 20%-25% margin floor matters — it is what is left after three layers of cost.
Terms, costs and timelines
| Transaction size | $250K - $10MM+ |
|---|---|
| Coverage of supplier cost | 70%-100% |
| Pricing (2026) | Roughly 2%-4% per 30 days on the funded amount |
| Time to close | 5-15 business days, driven by supplier and customer diligence |
| Gross margin required | Roughly 20%-25% or better on the transaction |
| What is financed | Finished goods that ship — resale, drop-ship, contract-manufactured |
| What is not financed | Services, labor, in-house work in process |
| Primary credit decision | Your end customer credit, then your supplier reliability |
| Typical exit | Invoice factoring on the resulting receivable, usually arranged in the same package |
| Serve fee | A success fee, earned only on closing. Agreed in writing before you sign anything. No retainers, no upfront costs |
PO financing vs. the two things companies usually do instead
| An advance against trailing revenue | PO financing plus factoring, arranged together | |
|---|---|---|
| How much you can get | Sized to 10%-15% of trailing annual revenue, so a step-change order is out of reach by definition | Sized to the order — 70%-100% of supplier cost, independent of your revenue history |
| When repayment starts | Immediately, daily or weekly, months before the goods ship | When your customer pays the invoice the order produced |
| What is underwritten | Your bank deposits | Your customer credit, your supplier record, and the margin on the transaction |
| Effect on the next order | A UCC filing and a daily draw that makes the next facility harder | A completed transaction and a factoring line that is already open for the next one |
| The other common choice — declining the order | Costs nothing today and costs the customer relationship permanently | Costs 5%-8% of the transaction and usually opens the account |
How this plays out, with numbers
A consumer products company doing roughly $7MM in revenue receives a $1.9MM purchase order from a national retailer, roughly triple its largest previous order. Supplier cost is about $1.25MM against an overseas manufacturer it has used for three years, with 50% due at production start and the balance at shipment. Gross margin on the transaction is about 34%. We arrange PO financing covering 100% of supplier cost — $1.25MM, issued as a letter of credit at production start with the balance released against shipping documents — priced at roughly 3% per 30 days. Alongside it, a factoring facility is set up on the retailer receivable at an 85% advance rate, so the moment the invoice is issued the factoring advance retires the PO position. Both facilities are documented together before production starts, which is the part that makes the timing work. The cycle runs 71 days from letter of credit to customer payment. Total financing cost lands near $102K against roughly $650K of gross margin. The company nets about $548K on an order it could not otherwise have accepted, and finishes with an open factoring line ready for the reorder that arrives four months later.
A representative structure, sized to a typical file. Details are generalized — we do not publish client specifics.
When this is the wrong answer
Half of being useful is being clear about what does not work. If one of these describes you, the honest path is below — and it may not run through us.
There is no supplier to pay and no goods to secure. What you want is invoice factoring against the receivable once you have billed, or a payroll-funding facility if the gap is between payroll and collection.
PO funders will not finance work in process, because half-finished goods are not collateral anyone can liquidate. Inventory financing or an asset-based line against raw materials and finished goods is the right structure. Some funders will cover the raw-material purchase specifically, which is worth asking about.
The arithmetic does not survive the cost of the money. Either the order needs repricing or the capital needs to come from a cheaper facility — an ABL or a bank line — which takes longer to put in place but works at thin margins.
Letters of intent, blanket agreements with no firm quantities, and verbal commitments are not financeable. A funder needs a document your customer is contractually bound by.
