Purchase Order Financing

The history of many successful businesses is marked with certain make-it-or-break-it moments in which the company found an opportunity to significantly expand its customer base and its range of operations. When an opportunity of this kind presents itself, a company must be able to capitalize on it. This can be difficult, however, as working capital isn’t always available when it is needed. Purchase order financing has helped a large number of businesses surmount this challenge.

Let’s consider a common scenario. A business has just received a purchase order from a customer. To fulfill the order, the company needs to pay a supplier. But there’s a serious problem: The supplier wants their money immediately and the customer will not pay the invoice for several months. As a result, the company may not have the cash on hand to complete the order. This is where a purchase order and invoice financing structure comes in.

With purchase order financing, a third-party organization (purchase order financing lender) pays the supplier directly. Then when the product is delivered to the customer, it turns into an invoice. The factor has the opportunity to buy invoices from a company. Once these invoices have been verified, after determining the advance amount sends cash directly to the purchase order financing lender.  If the calculated amount of the invoice’s value is greater than what is owed the purchase order financing lender, the balance is sent to the company. This amount typically represents the company’s profit. This enables the company to obtain the cash it needs to complete the order and continue operations on schedule. The factor then collects the outstanding invoices. For more information on invoice financing, please contact Overnite Capital—we’ve helped a wide range of businesses obtain cash in no time.