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If you sell physical goods to creditworthy customers but lack the cash to fulfill large orders, purchase order (PO) financing lets you cover supplier costs without depleting your working capital. We reviewed the top PO financing companies based on rates, funding speed, eligibility flexibility and industry expertise to help you find the right fit.
We evaluated PO financing companies based on funding amounts, published rates and fees, repayment terms, eligibility flexibility, funding speed, industry experience, domestic and international capabilities and customer reputation.
We prioritized lenders whose details could be verified directly on their own websites. Where rates or terms were not publicly disclosed, we noted that clearly rather than relying on third-party estimates.
How to compare purchase order financing companies
Not every PO financing company is right for your deal. Here’s what to evaluate before choosing one:
Rates and fees. PO financing fees typically range from 1.5% to 6% per 30-day period — and costs compound quickly if your customer pays late. For example, on a $50,000 supplier payment at a 3% monthly rate, you’d pay $1,500 if your customer pays in 30 days, but $3,000 if they take 60 days. Always convert the monthly fee to an APR before comparing to other financing options — PO financing frequently exceeds 20% APR.
Advance rate. Some lenders cover up to 100% of supplier costs. Others cap advances at 70% to 85%, requiring you to cover the difference.
Deal minimums. Minimum deal sizes vary widely — some lenders start at $100,000 per transaction while others require $500,000 or more.
Funding speed. If you’re on a tight timeline to pay a supplier, turnaround time is critical. Some lenders fund in 24 hours, others take five to 10 business days.
Domestic vs. international. Not all lenders fund cross-border transactions. If your supplier is overseas, confirm the company has international experience before applying.
Transition to invoice factoring. Many PO financing arrangements transition to A/R factoring once goods are delivered. Clarify whether the same company handles both steps and what that costs.
Customer creditworthiness requirements. Approval typically hinges on your customer’s credit, not yours. Confirm the lender will work with your specific customers before applying.
What is purchase order financing and how does it work?
Purchase order financing is a short-term, transaction-based funding solution where a lender pays your supplier directly so you can fulfill a customer order you don’t have the cash to cover. Four parties are involved: your business, your customer, your supplier and the financing company.
Once goods are delivered and your customer pays the invoice, the lender collects its fees and remits the remainder to you. Costs are billed in 30-day increments, so the longer your customer takes to pay, the more expensive the deal. Most lenders only finance finished or near-finished tangible goods sold to creditworthy businesses or government entities — not consumers and not services.
Pros and cons of purchase order financing
Pros
Accessible to startups and businesses with limited credit history
Approval based primarily on your customer's creditworthiness
Enables you to accept large orders you'd otherwise have to turn down
Faster to access than most traditional business loans
Cons
More expensive than traditional financing — often 20%+ APR when annualized
Only covers supplier costs for product orders
Does not apply to service businesses or companies selling raw materials
Customers may become aware, which can affect relationships
Partial coverage is common
Compare other business financing companies
Want to see how these lenders stack up against additional options? Use the comparison table below.
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PO financing structures vary depending on the type of goods, transaction complexity and where in the supply chain funding is needed.
Type
Typical funding amounts
Best for
Finished goods financing
$100,000–$25M
Importers and distributors buying ready-to-ship product
Light assembly financing
$100,000–$10M
Products requiring packaging, labeling or minor assembly
Production financing
Varies by lender
Manufacturers covering raw material and production costs
International/trade finance
$500,000–$25M
Cross-border transactions with overseas suppliers
Government contract financing
Varies by lender
Suppliers fulfilling federal, state or municipal contracts
How to qualify for purchase order financing
Unlike traditional business loans, PO financing is less focused on your credit score or revenue history and more on the strength of your transaction. Most lenders look for:
A valid, legally binding purchase order from a creditworthy commercial or government customer
A creditworthy supplier with a proven track record
A product consisting of finished or near-finished tangible goods (services generally do not qualify)
A gross profit margin of at least 20% to 30% (varies by lender)
An invoice or repayment mechanism so the lender can collect after delivery
Some business operations history, though some lenders will fund startups on their first transaction
How to apply for purchase order financing
Identify the purchase order. Confirm your customer’s order is from a creditworthy buyer and that the purchase order is firm, non-cancelable and includes clear delivery terms.
Gather your documents. Most lenders require the purchase order, supplier invoice or cost estimate, business financial statements and information about your customer.
Submit your application. Apply directly with the PO financing company online or via a representative. Many provide a pre-approval decision within 24 to 48 hours.
Review and accept terms. Confirm the advance rate, fee structure and how the lender handles customer payment before signing.
Supplier gets paid. Once approved, the financing company pays your supplier directly — often via letter of credit — so production and delivery can proceed.
Customer pays and deal closes. Your customer pays the invoice to the financing company. The lender deducts its fees and remits the remaining balance to your business.
Where can I get purchase order financing?
PO financing is most commonly offered by specialized online lenders and commercial finance companies — the providers listed above are good examples. Some banks offer PO financing for larger or existing clients, but they don’t typically advertise it for small businesses.
Business loan marketplaces can also connect you with PO financing providers through a single application. However, you’ll want to confirm any match is a true PO financing specialist rather than a general working capital lender rebranding a credit line.
Alternatives to purchase order financing
If purchase order financing doesn’t fit your business requirements, you still have options:
SBA loans. Small Business Administration (SBA) loans are known for competitive interest rates and government backing. SBA loans offer comprehensive funding solutions with favorable terms.
Invoice financing. With invoice financing, you can leverage outstanding invoices to access immediate cash flow without giving up equity. Unlike PO financing, this type of financing relies on existing invoices rather than orders.
Merchant cash advance. This option provides fast access to capital based on future credit and debit card sales. While convenient, it’s essential to know the higher costs associated with merchant cash advances compared to PO financing.
Business lines of credit. If approved, you can borrow up to a predetermined limit with interest payments only on what you use. Business lines of credit offer versatility in managing cash flow gaps without the restrictions of PO financing.
Frequently asked questions
PO financing fees typically range from 1.5% to 6% per 30-day period, depending on the lender, transaction risk and how long the order takes to fulfill. When converted to an APR, costs often exceed 20%, making PO financing more expensive than traditional loans but faster and easier to qualify for.
Yes. Most PO financing companies base approval primarily on your customer's creditworthiness rather than your business history, which makes it one of the more accessible financing options for startups selling to large or creditworthy buyers.
PO financing is used before delivery to pay suppliers so goods can be produced and shipped. Invoice factoring is used after delivery and converts unpaid invoices into immediate cash. Many PO financing arrangements transition to invoice factoring once goods are delivered and an invoice is issued.
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Megan B. Shepherd is a personal finance expert and editor for loans and insurance at Finder.
Her personal finance expertise has been featured on Forbes, Nasdaq, MediaFeed, Fox News, Time, Reviews.com, and carinsurance.com, adding invaluable information related to personal loans, financial strategies and smart borrowing tactics.
Megan graduated from the University of Texas at Dallas with a BS in Business Administration with an entrepreneurial focus. She's worked as a certified financial adviser and has earned certificates of completion from A.D. Banker & Company.
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