How to Get Purchase Order Financing: Step by Step
Winning a large order is good news until the supplier wants to be paid before your customer pays you. Purchase order (PO) financing bridges that gap. A financier pays your supplier so you can deliver, and is repaid when your customer pays the invoice. This guide explains who.
Winning a large order is good news until the supplier wants to be paid before your customer pays you. Purchase order (PO) financing bridges that gap. A financier pays your supplier so you can deliver, and is repaid when your customer pays the invoice. This guide explains who qualifies and the steps from signed order to repayment.
Short answer: get a firm order from a creditworthy customer, a verified supplier quote and a margin that covers financing costs. Present those in one deal file to a PO financier. If approved, the financier pays the supplier, you deliver and invoice, and the customer's payment repays the facility.
Is your order a fit?
PO financing suits businesses that buy finished goods and resell them, such as distributors, importers, wholesalers and government suppliers. It is a poor fit where the business heavily transforms the goods, sells to consumers, or has thin margins. Our comparison of purchase order finance and trade finance helps decide which tool fits.
Step-by-step: how to get purchase order financing
Check that your order fits PO financing
Ask three questions. Is the customer a creditworthy business or public body? Is the supplier established and able to deliver to specification? Is the gross margin large enough to pay financing costs and still leave profit? If any answer is no, fix it before you apply.
Secure a firm purchase order
Financiers fund against a written, non-cancelable order with price, quantity, delivery terms and payment terms. Letters of intent and email confirmations are rarely enough.
Lock in and verify the supplier
Get a formal quote or pro forma invoice with specifications, lead time and payment terms. The financier will verify the supplier, so make sure its legal name, address and bank account match. See how to verify a supplier.
Build the deal file and margin calculation
Prepare a one-page summary of the trade, the purchase order, supplier quote, shipping and delivery plan, a simple cost and margin table, and company documents. Set out the funding need and repayment clearly, as in a sources and uses schedule.
Approach financiers and pass due diligence
PO financiers differ in deal size, sectors, geography and whether they pay by wire or letter of credit. Expect checks on your customer, supplier, company and owners. Our list of purchase order finance lenders shows the range of providers.
Financier pays the supplier
Funds go to the supplier, not to you. Payment may be a direct transfer against agreed milestones or a letter of credit that pays against shipping documents. Expect the financier to require inspection or delivery evidence.
Deliver, invoice and refinance the receivable
Once goods are delivered and accepted, you invoice the customer. Many structures then refinance the PO advance with invoice factoring or invoice finance, which often costs less than keeping the PO facility outstanding.
Customer pays and the facility is repaid
The customer pays into an account the financier controls. The financier deducts its advance and charges and releases the balance to you.
PO financing compared with other options
| Option | What it funds | When it is used | Main requirement |
|---|---|---|---|
| Purchase order financing | Supplier payment before delivery | Confirmed order, no cash to buy goods | Creditworthy customer and verified supplier |
| Invoice factoring | Cash against issued invoices | After delivery, while waiting for payment | Invoices to creditworthy customers |
| Inventory finance | Stock held in a warehouse | Goods bought before orders are confirmed | Controllable, saleable inventory |
| Import letter of credit | Bank payment undertaking to the supplier | Supplier wants bank security | Bank credit line or cash margin |
| Revolving trade facility | Repeat purchases and sales | Regular trade flows | Track record and reporting |
What financiers look at
- Customer quality: the payer's credit standing matters more than your balance sheet.
- Supplier performance: ability to deliver on time and to specification.
- Margin: enough to cover financing costs, freight, duties and contingencies.
- Control: who holds title, where goods are, and where the customer pays.
- Your track record: past orders of a similar kind, even if smaller.
Documents to have ready
- The signed purchase order and any framework contract with the customer.
- The supplier's quote or pro forma invoice, with specifications and lead time.
- A cost and margin table covering goods, freight, insurance, duties and finance costs.
- A delivery timeline from supplier payment to customer payment.
- Company registration, ownership details, recent financial statements and bank statements.
- Evidence of past orders of a similar kind, if you have them.
Common reasons PO financing requests fail
- The order is a letter of intent, not a binding purchase order.
- The margin disappears once freight, duty and finance costs are added.
- The supplier cannot be verified or refuses to deal with a financier.
- The customer is a startup or consumer rather than an established business.
- The applicant wants the cash paid to itself instead of the supplier.
Pricing varies by financier, deal size and risk, so we do not quote rates here. Ask every provider for the all-in cost over the expected tenor, not only the headline rate.
Where an arranger helps
Financely prepares the deal file, tests the margin and structure, and approaches PO financiers and trade lenders that fit the order. It acts as an advisor and arranger, does not lend, and cannot promise approval. For businesses without trading history, see PO financing for startups with no revenue history.
Frequently Asked Questions
How does purchase order financing work?
A financier pays your supplier, directly or through a letter of credit, so you can fulfill a confirmed customer order. When you deliver and invoice, the customer pays and the financier is repaid from those proceeds, with the balance released to you.
Who qualifies for purchase order financing?
Businesses reselling finished goods to creditworthy commercial or government customers, with a verified supplier and enough margin to cover financing costs. Distributors, importers, wholesalers and government suppliers are the usual fit. Services, consumer sales and businesses that heavily transform raw materials are harder to fit.
Do I need good credit to get PO financing?
The financier looks mainly at your customer's credit, the supplier's ability to deliver and the margin in the deal. Your own track record and financials still matter, and a clean history makes approval easier. Expect due diligence checks on your company and its owners as well.
What is the difference between PO financing and invoice factoring?
PO financing pays for goods before delivery. Factoring advances cash against an invoice after delivery. They are often used together: PO finance funds the supplier, then factoring or invoice finance repays the PO financier. PO financing rests on a confirmed order and a verified supplier, while factoring rests on invoices to creditworthy customers.
How long does PO financing take to set up?
It depends on how quickly the financier can verify your customer, supplier and order. A complete deal file with the purchase order, supplier quote, margin calculation and company documents is the most reliable way to shorten the process. A letter of intent in place of a binding order usually stalls it.
Holding a large order you cannot fund from cash?
See how Financely structures this on Purchase Order Financing, or send the file for review.
Financely is an advisor and arranger. It does not lend, issue letters of credit or take title to goods, and no financing outcome is promised. Any facility depends on the credit approval of the bank or financier. This guide is general information, not legal, tax or regulatory advice.
Sources and references (checked 14 November 2026)