Purchase Order Financing

PO financing is a short-term financing option where a lender will pay your suppliers directly to cover materials and production of your order.  In some cases, if your gross margin is expected to be large enough, 100% of the cost can be covered.  This financing product allows you to accept orders that you may not have been able to otherwise, without you having to take on large amounts of new debt.

Grow Your Business The goal of most companies providing physical goods is to grow – they want to get their product everywhere. However, the cost of materials and production can be prohibitive, taking up all available working capital.  PO financing allows you to take on these big orders and grow your business without sacrificing cash flow.

Keep Your Reputation One of the primary ways to ensure a successful business is by fostering good relationships with clients, vendors, and employees alike.  PO financing makes it possible to fulfill orders and cover supplier costs without impacting your ability to cover operational costs (like payroll) – keeping your relationships and good reputation intact.

Improve Cash Flow With PO Financing, you’re able to accept and fulfill orders without dipping into your existing funds or taking on new debt.  This means you can continue to bring in sales revenue with little to no upfront costs and no interruption in day-to-day operations due to a lack of working capital.

Outsource Invoice Collection

A little recognized benefit of PO financing is that your lender will actually take on the responsibility of payment collection from your customer order. This saves you the time, resources, and money you would typically need to put into following up on client invoices.

At first glance, PO financing can seem a bit complicated, involving many parties – you, your lender, your suppliers, and your customers.  But, in reality, it’s quite simple and a great financing option for businesses that don’t have available cash, can’t (or prefer not to) get a business loan, and/or have limited credit with suppliers.  Here’s how PO Financing works, step by step:

1. A customer places a purchase order with you for the product.

2. You get a written proposal from your supplier on the cost of the order.

3. You apply for PO Financing.

4. Once approved, your financing company submits a purchase order to your suppliers.

5. Your supplier sends your financing company an invoice.

6. Your financing company pays your supplier.

7. The supplier fulfills the order and provides your customer with the goods.

8. You invoice your customer and also send the invoice to your financing company.

9. Depending on your agreement, your customer pays you and you pay your financing company, or your customer pays the financing company directly, and your financing company will send you your remaining balance minus any fees.

Yes, there are a few more steps to the process than what comes with traditional financing; but the entire transaction is seamless, and the outcome is a win-win for all.  You make a great sale, your suppliers get paid and your customers get their product.

One of the best things about PO financing is that, similar to invoice or accounts receivable factoring, approvals are not based on your personal credit score.  Because funds are being fronted directly to your supplier, and payment is received directly from your customer, approvals are based on their creditworthiness.

General approval requirements for PO Financing include:

• You must have a B2B (business-to-business) or B2G (business-to-government) company.
• You must provide physical goods.
• Your supplier must have good business credit.
• Your customer must have good business credit, trade, and payment history.
• Your order must have a profit margin of a minimum of 1 percent.

Applying for PO financing arranged by Kapitus® is simple, despite the number of steps that come along with this type of financing!  Completing the application should only take minutes.

To get started, simply fill out our online application, upload your three most recent bank statements, the Purchase Order from your customer, and cost estimate from your supplier…and you’re all set!  Once your package has been submitted, a Kapitus Financing Specialist will be in touch with a decision and next steps.

Kapitus PO Financing is available to any B2B and B2G business that provides physical goods to its customers. Here are the industries that most frequently use PO financing:

• Manufacturers
• Wholesalers
• Distributors
• Outsourcers
• Resellers