Purchase Order Funding

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Factoring – We’ll help you grow

Financial transaction in which a business sells its invoices, or receivables, to a third-party financial company known as a “factor.” The factor then collects payment on those invoices from the business’s customers. Factoring is also known as “accounts receivable financing.”

Companies factor in order to receive cash quickly on their receivables, rather than waiting for the 30 to 120 days it takes for customers to pay. Factoring allows companies to quickly build up their cash flow, which makes it easier for them to pay employees, fulfill orders and grow.

Purchase Order Funding, also known a Purchase Order Financing, is a great tool to finance large purchase orders. Businesses can secure financing for the purchase of goods for resale based off of an existing purchase order.

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Not A Loan

Pays Suppliers Direct

Accept Large Orders

HOW IT WORKS

The Factor

Accounts receivable factoring involves the sale of accounts receivable to a factor. The accounts receivable factoring client sells goods or services to their customer and issues an invoice. The factor purchases that invoice at a discount and advances payment up to a certain percentage of the overall value (typically between 70-90%). The factor then collects payment directly from the end customer.

Invoicing

After delivering a product or service to your customer, you simply invoice your customer and submit a copy of the invoice to the factor with the necessary paperwork (schedule of assignments). This can be done electronically or with paper invoices depending on how you are set up with your clients.

The Cost

AR factoring costs vary depending on the quality of credits or customers you are dealing with and the size of the factoring facility. The projected volume of the deal can also affect the rate.

Max Funding

80% is a standard advance rate for a new factoring client. The advance rate can go up or down depending on the financial condition of the client, strength of the end credits, and selling terms.

Businesses can utilize Purchase Order Funding to finance up to 100% of the purchase cost of goods for resale.

PURCHASE ORDER FUNDING FAQ’s

What is Purchase Order Funding?

Purchase Order Funding is a financing option for businesses that need to cover the costs of producing or acquiring goods for resale. It is often used in conjunction with an accounts receivable factoring arrangement. For many growing businesses, PO Funding is a more desirable financing option than traditional bank loans.

What’s the difference between Purchase Order Funding and Purchase Order Financing?

There is no difference! The terms Purchase Order Funding, PO Funding, Purchase Order Financing, and PO Financing can be used interchangeably. We use the terms interchangeably throughout our website to reflect this.

How does Purchase Order Funding work?

Purchase Order Funding works in a few easy steps. Upon receipt of a qualified purchase order from your customer, IGA will match a provider that will cover the cost of producing or acquiring those goods for resale. The goods are then shipped to your customer per their purchase order. An invoice is issued to your customer and the provider is paid back by your Accounts Receivable Factor as the first advance against the resulting accounts receivable.

Do I need to have good personal credit for Purchase Order Financing?

No, a Purchase Order Financing transaction relies on the credit of the end customer and their ability to pay for goods. Providers also consider the ability of our client to produce the goods and deliver as stated on the customer purchase order.

What documents should I submit to get approved?

Getting set up for PO Funding is easy. To start, basic financial and corporate information is all that’s needed. In order for a provider to consider financing an order, our client must have a purchase order from their customer, the pro-forma invoice from their vendor, and an understanding of payment terms and lead teams. The more details a business presents when submitting a transaction, the easier it is for us to execute it smoothly.

How much does Purchase Order Financing Cost?

PO Financing Rates can vary depending on the length and type of transaction. For example, a complex Work In Process has a higher cost of funding associated with it than PO Financing to purchase finished goods for resale.

How much do you advance against the Purchase Order?

The costs of production or acquisition of goods up to 100% as long as the goods are pre-sold to credit-worthy end customers.

Can I buy products from more than one supplier?

Yes. You can buy items from multiple suppliers. Depending on where the goods are coming from and what the lead times are, it may be required that your customer allow for partial shipments. we will evaluate the proposed transaction and provide whatever guidance necessary to help get the deal done for you.

Do you inspect goods prior to funding a transaction?

Yes. We always want to inspect goods prior to paying for them. When available, a third-party inspection company handles the inspection process. It’s important to note that not all third-party inspection companies are qualified in all areas. IGA will help you select an inspection company that is most suited for your business—within reasonable timeframes and budgets.

How is PO Financing different from inventory finance?

In a PO Financing transaction the lender is purchasing products that are presold to an end customer. When financing inventory a lender will help purchase new inventory or lend against existing inventory that will be sold at a later date(hopefully).

Is purchase order financing for startups possible?

Of course it is. As long as there is a purchase order from a credit worthy customer and a reliable vendor. Some lenders may choose not to fund startups.IGA works with both new and existing businesses and will even consider funding the first transactions a business comes across.

Can you finance international purchase orders?

Yes, international purchase order funding is done in the same way we finance domestic orders. Depending on whom you are selling to we may request a letter of credit, shorter terms, or other accommodations to get comfortable with the transaction.

What info do purchase order financing companies need?

In order to evaluate a a transaction the PO Financing company will require all of the buy/sell information. Anything you have that helps show how products are being bought and sold will be important to the lender. This includes Purchase Orders from your customer, pro-forma invoices from your vendor, production schedules, etc.

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