Purchase order financing helps wholesalers and product re-sellers that need funds to fulfil a purchase order. It covers the supplier expenses, which enables you to complete the order and book the revenue.
PO financing is flexible and is easier to obtain than comparable financing solutions. Our program is flexible, has simple qualification requirements, and can be deployed quickly.
We can provide purchase order financing at competitive rates. Fill out this form for an online quote. Call us toll-free at (877) 300 3258 to speak to a representative.
Note: This solution is not intended for manufacturing companies. Manufacturing companies should consider supplier financing instead.
Benefits
The most important benefit of a purchase order funding program is that it enables you to fulfil larger orders. There are other benefits, which include the following:
- Available to small companies
- Can be used as needed
- Simple qualification requirements
- Can be deployed quickly
- Grows with your business
How does purchase order financing work?
Purchase order financing can only cover the supplier expense associated with the order. The finance company pays the supplier directly on your behalf.
Most suppliers are paid using a Letter of Credit (LC). Exceptions can be made for large suppliers in Canada or the US at the discretion of the finance company. Transactions usually flow as follows:
- LC issued to your supplier
- Supplier manufactures and delivers products
- Your customer receives products
- You send an invoice to your customer
- Your customer pays the invoice (net-30 to net-60)
- Transaction settles
Transactions can settle in one of two ways. The purchase order financing company can settle the transaction directly once your customer pays. Alternatively, you can settle at delivery through a factoring line. Using a factoring line for settlement may have advantages in some instances.
To learn more, read “How Does Purchase Order Financing Work?”
Qualification Criteria
To qualify for purchase order financing, your company must resell unmodified products and:
- Have a valid purchase order (minimum $100,000)
- Have profit margins of at least 20%
- Have unencumbered receivables (e.g. PPSA or hypothèque)
- Have no serious legal or tax problems
- Cannot have a consignment or “guaranteed sale”
Costs
The cost of purchase order financing varies by transaction and is determined by the following:
- Order size (minimum $100,000)
- Creditworthiness of your clients
- Transaction structure
- Transaction risk
We can provide purchase order financing at competitive rates. Fill out this form for an online quote. Call us toll-free at (877) 300 3258 to speak to a representative.
How to evaluate PO finance companies
Many factoring companies offer purchase order funding to certain “select” customers as an “accommodation.” These accommodations are usually one-off transactions.
However, few factoring companies have the knowledge and capabilities to handle complex transactions. Working with the right company is essential to the success of your transaction. Consider asking the following questions during your due diligence:
- How long have they been in business?
- What percentage of their portfolio consists of purchase order financing?
- How do they pay suppliers?
- How does the due diligence process work?
- How long does due diligence take?
- Are there any due diligence fees?
- Do they require any minimums?
- What is the smallest order they can finance?
- What is the largest order they can finance?
- What is the term of the contract?
Instant quote
We can provide purchase order financing at competitive rates. Fill out this form for an online quote or call us toll-free at (877) 300 3258 to speak to a representative.
Essential reading
We want to help you make an educated decision and have an extensive learning centre. Popular articles include the following:
- What is Purchase Order Funding?
- Financing Your Imports from China and Asia
- Purchase Order Financing for Re-sellers and Traders
Locations
We offer our financing services in most provinces across Canada. For specific information, visit: