Purchase Order Financing is for importers & distributors who have pre-sold their goods or, in other words, already have a Purchase Order for these goods from a customer. PO Financing helps the company fulfill the customer PO by paying the supplier who manufactures or sources the finished product.
Step-by-Step Guide for PO Financing:
- A business receives a Purchase Order from another company (buyer) to purchase tangible goods.
- The PO finance company will check the buyer’s credit.
- Once approved, the PO finance company will contact the buyer to verify the PO and arrange payment to the supplier of finished goods.
- Payment is made to the supplier upon inspection and shipment of finished goods.
- The goods are then delivered to the buyer to fulfill the PO.
- If the buyer pays upon delivery, they will make payment to the PO finance company, if they have extended payment terms, an accounts receivable factor will need to be involved to factor the invoice and pay the PO finance company off at that time.
What does it take to qualify for PO financing?
Approval is based on the buyer’s credit, rather than the client company’s credit. Therefore, start-ups can qualify! Other items that are taken into consideration are the profit margin of the transaction, the buyer’s terms of acceptance and payment, and other risk factors.
If you are interested in learning more about how purchase order financing and invoice factoring can benefit your business, contact your local Riviera Finance office.