Purchase Order Financing

 

 

 

 

Purchase Order Funding, or PO financing, is used to pay your suppliers, laborers, or other intermediaries for goods or services to generate additional sales. A company will need PO financing when:

  • You need expertise to handle the financing
  • You need additional working capital
  • You need a quick response to an immediate sales need
  • You don’t want to incur additional credit risk, be it foreign or domestic
  • You want your buyers and sellers to not know each other
  • You want the opportunity to make additional profit

Advanced Capital Funding understands all the above reasons and will work with you to fulfill your purchase order funding needs.

Every purchase order finance transaction stands on its own. We look at your business history, the credit worthiness of the buyer, the ability of your supplier to produce the goods, and if the transaction is profitable for all parties.

Business History

We consider purchase order funding for those organizations with a track record of producing goods. Your company may be young or a start-up, but your company management must have a proven track record to produce the goods.

Buyers Purchase Order

Your buying firm must be reputable with a good credit line. The purchase order must be verifiable.

Suppliers

Your suppliers must know your product and be able to produce it in time and to meet your buyer’s terms. The supplier must be a firm with a good business history and track record of producing goods.

Profitability

The transaction after all expenses must make a profit for all parties. Payment of the money lent to support the transaction can come from any number of sources such as factored receivables.

Purchase Order Financing is available only to qualified customers. P.O. Financing falls into two types:

Finished Goods

Non-Finished Goods

Finished Goods refers to transactions where the goods are never touched by you. Usually these goods go directly from your supplier to your buyer. You never take direct possession.

Non-Finished Goods are when you the seller take possession of the goods either in a raw state (such as yarn to make blue jeans) or a semi finished state (partially sewn blue jeans). In either case you must take possession of the product.

Finished Goods are easier to finance than Non-Finished Goods. We will need to assess your ability to complete the transaction in processing the goods for the final shipment to your buyer. Advanced Capital Funding finances both Finished and Non-Finished purchase order financing.

In order to consider Purchase Order Financing for your firm we will need you to review Lending Requirements:

Generally we charge 5% one time fee for purchase order financing on the gross amount to be paid by the buyer. Sometimes there may be an additional interest charge on the money advanced if the purchase order takes greater than 30 days to complete. Every purchase order pricing is individual and unique. This purchase order fee does not include the factoring fee which may cost an additional 3% to 6% if you are factoring the receivable.  In order to see if the transaction will make money for both parties, please fill out the worksheet section of the application form. As you can see the total cost of purchase order financing fee and factoring fee can range from 8 to 11%. Since both of us need to make money, the gross margin should be greater than 18%.

How it works

Your buyer gives you a purchase order for goods.

You give your supplier your company’s purchase order to fulfill the buyer’s purchase order. The gross margin between the two purchase orders should be at least 18%.

Your supplier ships goods to you (non finished goods) or to your buyer (finished goods). Payment to your supplier is made by ACF immediately or some time in the future subject to the negotiated terms. This is called Purchase Order Financing.

If the goods (non finished) were sent to you from the supplier, you finish making the product and ship to your buyer the finished product.

You send your invoice for your buyers order to ACF for factoring. ACF factors your invoice to your buyer. We advance you funds against this invoice less any factoring and purchase order financing fees. In this case, the funds are used to make payment to ACF to pay off the amount we paid to your supplier for the purchase order financing plus any purchase order fees for our services.

When your buyer pays the invoice per terms we collect our factoring advance and interest charges. Any funds left are forwarded to you.

To find out more information about the approval process, please review the Lending Requirements.

To apply for funding, please complete the Online Application.