Purchase order financing gives an organization the capital needed to deliver a particular purchase order. Usually, the lender will pay a supplier giving a company access to the needed supplies. Then, the lender will collect invoice from the end customer, make their deductions and return the remaining amount to the borrowing organization. As with the asset based lending and factoring, a company’s credit history is not a determinant of whether they will get financing or not. As long as the end customer has a high financial strength, then this option is viable. Purchase order financing is particularly great for wholesalers.
Access to capital is a major challenge for many small and medium-sized businesses. However, options like asset-based lending, factoring, account receivable financing and purchase order financing exist that can make this process easier and faster.