Business line of credit for small business

What is Purchase Order Financing?

Purchase Order Financing is an Invoice Financing product funded by lenders that provides capital to businesses to purchase the goods and supplies necessary to complete purchase orders.

This product requires a written purchase order and can provide companies with financing to cover up to 100% of the costs of the supplies needed to fulfill a purchase order.

If a company has at least a 20% profit margin within its orders from its clients, plus they have a steady supply chain that can fulfill an order to their clients within the net 60 business days and have clients that will pay their invoices within net 90 business days.

Then Purchase Order Financing can be an excellent product for both companies that need capital to fulfill purchase orders and companies that want to preserve their capital for other areas of their business. Purchase Order Financing works hand in hand with either Factoring or Accounts Receivable Financing as methods to pay off the funding and close out the transaction.

Our goal is to be our client's trusted business financing partner from inception to the day they sell their business.
ADC Business Consultants are here to offer our clients all of their years of experience in providing capital to companies to grow and expand.
We have custom-tailored options to meet a company's specific needs. ADC works diligently to provide each client with funding terms that fit their goals.
We pride ourselves on going the extra mile for every client that we work with and excel at delivering the capital they desire to grow their business.
Purchase Order Financing is designed for growing businesses that want to fulfill orders for their B2B Clients, including but not limited to:
  • –    Startups
  • –    Wholesalers
  • –    Distributors
  • –    Resellers
  • –    Importers or exporters of finished goods
  • –    Outsourced manufacturers
  • –    Government contractors who are fulfilling government orders

Purchase Order Financing lenders step in once a company has landed a B2B Purchase Order from a creditworthy client and needs or wants capital to acquire the goods or inventory from their suppliers to fulfill the order.

This product can either pay a company’s suppliers directly or issue the supplier some form of a Letter of Credit or Supplier Guarantee. On average, it can typically take anywhere from net 15 up to net 60 business days to convert a purchase order to an invoice by fulfilling and delivering the goods to the client.

After the supplier has either delivered the goods ordered directly to the company facilities for them to deliver the goods to their clients or to the companies contract manufacturer or fulfillment center, who, in turn, will deliver the goods to the end-user client.

Once the end-user client receives the goods as ordered, the PO will be converted into an invoice for payment. Commercial Invoices are typically paid on terms ranging from the standard net 30 to the net 60 business days range. Although invoice payment terms can be as short as net 15 business days to as much as net 90 business days or more.

Since Purchase Order Financing, is always closed out and paid off by converting the invoice to either Factoring or Receivables Financing. Then as soon as each Purchase Order is converted to an invoice for payment upon delivery to the client.

The lender that provided the initial stage of financing will process the invoice for an advance of capital by using the invoice as collateral, to provide liquidity to the company before the invoice’s actual payment date.

The Factoring Financing or Receivable Financing will unlock an advance of up to 90% of the invoice value minus the amount already advanced for the Purchase Order side of the transaction and the PO Financing cost of capital fees once the client pays the full invoice in net 30 to up to net 90 business days.

The lender will remit the balance of the invoice left over after the first two advance stages minus the Invoice Financing cost of capital fees. From there, the transaction will be paid off and completed from the date of the initial purchase order to the final payment from the client.

This product could be a great option to help a company expand and take the business to higher heights. AmeriDream Capital and our team are here to help companies and their owners achieve all the best benefits that Purchase Order Financing can offer a business.

The benefits of purchase order financing include but are not limited to:

Purchase Order Financing is a business financing product that allows companies to be awarded capital to purchase from 75% to up to 100% of their supply cost to fulfill a specific order from a creditworthy B2B client.

The goal of this Invoice Financing product is to create two happy parties in one transaction – A company that was able to receive the funds to fulfill a specific order and their happy client who was able to receive the products ordered.

Companies can fulfill their POs without using cash, without adding debt to your balance sheet, and without selling equity to outside investors.
This product might allow companies to be able to capture additional market share by increasing their output.

By utilizing Purchasing Order Financing, a company can take on additional orders from new and existing clients, knowing that the business can have access to the capital needed to fulfill each purchase order.

Companies can no longer have to turn down work because the company is short of working capital.

Purchase Order Financing can be used for finished goods orders.
This product can work well for Start Up’s and even for companies that the owners have less than excellent credit.

Due to this fact, the critical underwriting metric is the credit score of the company’s customer.
The product helps companies to meet their production deadlines.

Since every single PO Financing requirement can vary from lender to lender. Here are the typical qualification requirements for Purchase Order Financing:

Minimum of 6 months of sales history for each customer with the same products (not new items)

Profit margins of at least 25% to 30% (calculated per transaction by comparing your supplier’s costs to the amount you charge your customer)
The company must be selling Sell to B2B or B2G customers

An order of at least $20,000

The company must sell its goods to creditworthy customers

The company must have reputable suppliers who can manufacture and deliver the goods to your customer on time

In the event of a return or a canceled purchase order, Items are resalable at an auction without contingencies.

Purchase Order Financing is an Invoice Financing product funded by lenders that provides capital to businesses to purchase the goods and supplies necessary to complete purchase orders.

Available Capital Limit

Up to 100% Financing Per Purchase Order

Standard Interest Rates or Cost

Rates Start at 1.5% for the 1st 30 Days

Typical Underwriting TimeLine

3-5 Business days

Average Term Limits

12 to 24 Month Terms

In Closing, According to the 2020 Census data, the US Durable Goods Nondefense new orders for capital goods in April increased $3.8 billion or 8.2 percent to $50.1 billion. Shipments decreased $9.2 billion or 12.6 percent to $63.8 billion.

Unfilled orders decreased $13.7 billion or 2.2 percent to $624.8 billion. Inventories increased $0.2 billion or 0.1 percent to $190.3 billion. There is a ton of capital on the table to grab up for those companies that want to grow and take market share.

Purchase Order Financing cost can even include labor and freight costs involved. We use innovative ideas in funding transactions, and each client is unique, and we come up with a customized solution for each situation.

AmeriDream Capital has a team of seasoned Business Financing Consultants that specialize in providing clients with access to the best Purchase Order Financing options.

Please apply online, email us for an appointment, or call us today. Our team is committed to helping your business grow with Purchase Order Financing and will guide you through the loan process each step of the way

Let’s work together

Get in touch today and receive a complimentary consultation.

Call us 1-929-216-1362
Unlocking Your Business’s Full Potential: The Power of Funding and Growth
A Business Line of Credit: How Important Is It for Your Business?
What business line of credit
How to Consider Choosing Business Financing Options for Your Company