Purchase Order (PO) Financing

How to Define Your Target Market from The Startup Garage
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Purchase Order Financing provides entrepreneurs a means of paying a supplier upfront when cash-reserves are not available to fulfill an order.  This type of funding is useful for growing companies who may secure a sale but lack sufficient funds to purchase the necessary supplies to fill the order.  In this case, a purchase order financing company will supply funds directly to the supplier, typically using a letter of credit. When the end buyers of the product pay the company, the company then re-pays the purchase order financing company for the cost of the material, plus additional fees.  Purchase order financing is sometimes thought of as a twist on factoring that has arose over the last few decades

Purchase order financing is particularly useful for wholesale companies that move product directly from supplier to buyer.  The duration of the loan is typically 30 days and companies typically charge interest on the loaned money at rates as high as 3.5%/month (annual rate equivalent of  more than 40%).  Historically, banks have offered some type of purchase order financing to their longstanding clients, though following the 2008 financial crisis they have become harder for business owners to secure through traditional bank lenders.


Whether you have a question about Purchase Order Financing, or you’d like to discuss our business plan writing services, feel free to contact us for a free consultation!
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About Tyler Jensen

I work with entrepreneurs who are looking to attract investment and get out of the "Garage". I am passionate about helping entrepreneurs start companies that matter. I helped launch over 100 Companies, Non-Profits and Social Enterprises. I consider myself a serial entrepreneur, startup coach & trusted advisor. * Launching New Companies (For Profit, Non-Profit and Social Enterprise) * Expert Business Plan Writer * Extensive Network of Business Relationships focused on Launch & Rapid Growth of New Companies * Startup, Growth, Marketing, Technology, Web, Business Systems * Trusted Advisor to CEO’s & Entrepreneurs * Capital Raising Strategy Development * Startup Team Development The first company I started and sold is VAVi Sport & Social Club which grew to over 25,000 members in six years, was recognized as San Diego’s 30th fastest growing private company in 2006 by the San Diego Business Journal and 32nd fastest in 2007, and sold for over 25X the capital investment.