What is Purchase Order Financing?
Purchase Order Financing is a short-term form of financing used to acquire finished goods that have been presold by the client to its credit worthy customers. Funding involves the issuance of letters of credit or payment of funds that allow clients to obtain inventory to fulfill customer orders.
Why Purchase Order Financing?
Purchase order financing is commonly used when a client with limited credit capacity is selling to an end user with strong credit. It allows clients to make large sales that would otherwise exceed their credit capacity. Benefits of purchase order financing include:
The Facts on Purchase Order Financing
• Increased credit capacity based on the strength of the end user
• Allows smaller clients to compete on larger orders
• Provides working capital availability
• Insulates buyers from sellers
• Eliminates additional credit risk
• Uses funding source's expertise in handling financing arrangements