What is PO Funding?
Purchase order (PO) funding pays your suppliers, domestic or international, for 70%–100% of a confirmed customer purchase order, at 1.5%–3% per 30 days, with deals from $250K to $50M. As of 2026, it's the one product that solves cash trapped between you and your supplier. It pairs naturally with invoice factoring: PO funding covers production, factoring covers the wait after delivery.
How It Works
Purchase order funding, or PO funding, solves the cash gap between winning an order and getting paid for it. You have a confirmed purchase order from a customer, but your supplier wants a deposit, or full payment, before production starts, and your customer will not pay you for 60 to 120 days after delivery. The money is trapped between supplier and customer. A bank typically cannot help because no invoice exists yet, only a promise of one.
A PO funder steps into that gap by paying your supplier directly so production can move forward. Some structures give you a credit line with the supplier; others wire the supplier on a per-order basis. Either way, the mechanics are the same: you get the materials, you build and ship, you invoice the customer, and the PO lender is paid off the moment that invoice is created.
The part most owners do not anticipate is that the PO lender expects to be repaid immediately at invoice. They do not stay in the deal through the customer's payment cycle. That requires a takeout: an invoice factoring or accounts receivable line that funds the moment the invoice exists. We almost always arrange the two together. Paired well, PO funding plus factoring covers the full cash cycle, from supplier payment through customer payment.
As of 2026, PO funding runs 2–3% per 30 days, with select lenders closer to 1.75%. The invoice-side line is roughly half that, around 1–1.5% per 30 days, because the risk is lower once a real receivable exists.
PO funding is not the right tool when there is no clean supplier-to-finished-product chain: for example, a custom manufacturer assembling forty different components into one finished good. That is work-in-process financing, which is a different structure.
Quick Facts
| Facility / Loan Size | Facility sizes typically $250K to $50MM |
|---|---|
| Cost of Capital | PO costs typically 2%–3% per 30 days; our network sometimes hits closer to 1.75% |
| Funding Timeline | Realistic timeline: factoring + PO combo placed in 2–3 weeks once documents are in |
| Best For |
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Key Features & Benefits
Funds 70%–100% of a confirmed customer purchase order, as of 2026
PO costs typically 2%–3% per 30 days; our network sometimes hits closer to 1.75%
AR takeout on the back end runs roughly half the PO rate (closer to liquidity = less risk)
Pays domestic and international suppliers directly, in their terms
Works for drop-ship, warehouse-fulfilled, and overseas-sourced orders
Pairs with invoice factoring to cover the full supplier-to-customer cash-conversion cycle
Lender underwrites on the strength of the end-customer's credit, not yours
Facility sizes typically $250K to $50MM
Realistic timeline: factoring + PO combo placed in 2–3 weeks once documents are in
Volume drives down cost: bigger, predictable PO flow earns better pricing
Honest exclusion: PO funding generally doesn't fit custom manufacturers buying many components. That's WIP financing territory
Terms, costs and timelines
| Coverage of supplier cost | 70%-100% |
|---|---|
| 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 |
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. That is $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.
PO Funding - Common Questions
Get answers to the most common questions about po funding
See It In Action
Real companies using PO Funding to solve their capital challenges
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Other Funding Solutions
Working Capital Loans & Lines of Credit
A working capital loan is short-term, revenue-based financing of $100K to $10M+ that funds in 2 to 10 business days, priced at 1.25%–4% per month. As of 2026, it's the fastest way to cover payroll, inventory, or growth-driven cash gaps when a bank can't move quickly enough, and at the same speed as a merchant cash advance it costs roughly half as much because the payment is monthly rather than a daily extraction from sales.
Learn more about Working Capital Loans & Lines of Credit →Invoice Financing
Invoice factoring is the practice of selling unpaid B2B invoices to a factor for 75%–95% of face value within 24–48 hours, then receiving the balance (minus a 0.25%–1% fee per invoice) when the customer pays. As of 2026, pricing typically runs Prime + 1–6%, facility sizes range from $250K to $100MM, and the facility scales automatically with sales. Approval looks at your customers' credit rather than your tax return, which is why it works for growing companies whose financials don't yet tell the full story.
Learn more about Invoice Financing →Equipment Leasing
& Financing
Equipment leasing and financing covers $100K to $50MM+ of machinery, vehicles, or technology over 3–7 year terms, with advance rates of 70%–85% of liquidation value and pricing of Prime + 3–10%. As of 2026, financing the asset directly is almost always cheaper than drawing on a working-capital line for the same purchase. Sale-leaseback structures let you extract 50%–70% of the equity from equipment you already own without adding a new debt covenant.
Learn more about Equipment Leasing & Financing →