Purchase Order Finance: The cash you need to start the work

Get the funding you need for supplies, staff and other costs - as soon as you get the order

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Fast

  • Rapid access to funding
  • Competitive rates
  • Individually agreed arrangements
  • Money can be used for any business purpose

Supports cashflow

  • Advance repaid when payment received from customer
  • Adverse Credit – no problem
  • No capital costs
  • Reduced demand on cashflow

Supports growth

  • Ideal for growing businesses
  • Funds to pay suppliers
  • Funds to pay workforce
  • Reduces burden from slow paying customers

Talk to Rangewell – the business finance experts

We know that is your business is growing fast, or has large orders it can mean cashflow problems. We know the lenders who can help with funding that keep pace with every order you receive.

Any business that is growing fast, or which has secured a large order can face cashflow problems. The cash may simply not be there to do the work.

Purchase Order Finance can provide the solution. As its name suggests, it is a form of finance secured on a purchase order, the agreement issued by a buyer to a company setting out the prices and quantities for a product or service when they are ready to buy.

Securing a major order, supported by paperwork in the form of a purchase order is a major plus – but it can mean challenges for your business:

  • First, your business needs to pay its suppliers before it can produce the goods to fulfil the order.
  • Second, depending on the business sector, the customer may have lengthy payment terms, in some cases up to 120 days.

Paying the supplier and waiting for payment from the customer can mean a cashflow problem for the business. They need substantial finance to cover the period from receiving the order until they get paid by the customer.

Purchase Order Finance, or 'PO Finance', provides funding for businesses to pay their suppliers and smooth out cashflow. It is a form of cash advance secured against a confirmed Purchase Order.

How Purchase Order Finance helps you grow

Your company may simply not have the cash reserves it needs to handle a large order, particularly in its early stages. You will need to purchase supplies, pay personnel and cover all related expenses, from admin to packing and delivery.

Because you won’t be getting paid until long after the job is complete, it can look impossible for your business to handle large clients, even if you have the skills and the production capacity.

Obviously, you can’t afford to turn those large clients down. PO financing allows you to accept large orders from trusted clients, by ensuring you have the money for supplies.

It means you can afford to take on large orders and big clients, ensuring that you can grow your business fast.

How Purchase Order Finance works

With Purchase Order Finance, the finance company will first need to see a confirmed Purchase Order from a relatively well established and financially secure customer. They will want to ensure that your buyer is really in a position to pay for the goods once they have been completed.

They will then make a cash advance to your business, which will allow you to buy in supplies and deal with other costs. The level of funding will depend upon your business sector, the value of the order and the costs you face, and the strength of your customer, the company issuing the Purchase Order. This advance may not be for the entire amount of the order, although some arrangements may provide a high percentage of the total value.

Once work is complete, the Purchase Order finance provider will collect the payment from your end customer. They will then deduct their fees in return for the facility, which will be made up of interest as well as a charge for the transactions, and transfer the remainder to you.

Alternatively, you can allow the Purchase Order financing company to open up a line of credit with your supplier. The line of credit will be opened in their name and backed by them, allowing new businesses and those with a poor credit record to get the supplies that they need.

The advantages of Purchase Order Financing

Easy to arrange

Purchase Order Financing from a specialist provider may be easier to qualify for than bank financing. It may be possible to arrange even if your business does not have a high credit rating, as it is actually the creditworthiness of your end-user customer who creates the purchase order that acts as the security for the cash advance.

Frees up cash

When you use Purchase Order Financing, you can use your cash reserves for your other operating costs, such as advertising and fulfilling other jobs. Demands on your operating capital are reduced.

Reinforce your cashflow

PO Financing can provide a steady source of cash that keeps pace with your business operations. The more work you do and the more purchase orders you receive, the more cash you can call on.

Funding growth

Purchase Order Financing can help your business grow by allowing you to take on large orders and repeat business that would otherwise be beyond your financial resources. Having cash upfront allows you to negotiate better deals on supplies and to bring in staff and machinery that would otherwise not be affordable.

By ensuring that you never have to turn down a profitable order because it is beyond your resources, it means your business can grow as fast as you can find customers.

PO Financing includes collections

The Purchase Order Finance company will not only advance you the money, they will also collect payment from your client. This eases your administrative burdens, freeing your team for productive work.

  • It lets you target larger customers and take on larger orders safe in the knowledge you can call on the finance you need
  • You don’t need an established credit record - with a confirmed order from an appropriate customer typically no additional security is required
  • You can negotiate better deals from your suppliers, as you can be a cash purchaser
  • You can preserve your working capital
  • You can support your growth plans, and target larger customers

Is it right for your business?

Purchase Order Finance has grown steadily in recent years, as the availability of bank financing, such as overdrafts, has decreased. It may work best if your business has relatively high profit margins and ambitious growth plans, when it can provide a competitive source of the funding you need to maintain growth momentum.

REAL EXAMPLES OF WHAT WE CAN DO

  • Help arrange funding for a bathroom fitting company supplying a major developer

  • Find an arrangement for a plastics company providing an IT manufacturer

  • Find finance to let a shoe company fund a large overseas order

  • Source funding to support a furniture manufacturer supplying a government contract

  • Arrange funding for a new electronics hardware business with a major order from a high street retailer

Financial solutions from Rangewell

The rates and terms offered by Purchase Order Finance providers vary, and it is important to have expert help to get the most competitive provider for your business type, your sector and your turnover.

At Rangewell, we can use our financial expertise to support your business – and ensure that you have the financial solutions you need. We can help source providers who can provide solutions tailored to your sector - reducing your costs, and increasing the levels of funding that you can call on.

What business owners say abut Purchase Order finance...

We got in our first big orders from a large corporate customer - but we knew it would mean long delays on payments that we could not afford. Purchase Order finance was the solution.

We had some big plans for growth, but we needed the finance. Purchase order finance means we don’t need to borrow - we can afford to take on big orders as we get them.

We were going to turn down the best contract our paper supply business ever had, because the customer would keep us waiting for 120 days before they paid. With Purchase Order finance we could afford to wait for their payment.

Helping you build your profits

Accelerate your cash flow

Purchase Order finance effectively accelerates cashflow, so that instead of waiting for customers to pay within their normal credit terms, you receive cash as soon as they order.

Funding for the entire process

Purchase Order finance will allow the whole trade cycle to be financed right from the initial purchase order through to the end customer settling the invoice.

A solution for growth

Purchase Order finance can be a solution for businesses that are growing at a rapid rate, and need the cashflow to fund continued growth.

Avoid the need to ask for deposits

A large customer issuing a large purchase order may expect credit terms and be unwilling to pay any kind of deposit. Purchase order finance can allow you to take on the work with funding in place.

Flexible

Purchase Order Finance is flexible. Once set up, the facility can grow or reduce in relation to the level of orders you receive.

Fast funding

Purchase Order finance can provide funds very quickly. In the current economic climate, when many forms of business lending can be difficult to secure it can provide cash for large orders as soon as it is needed.

Download Rangewell’s free and detailed guide to Purchase Order Finance

Purchase Order Finance
  • The principles behind all types of invoice finance

  • Why not all funding providers are equal

  • How we can help you pay less

  • The downsides to Purchase Order Finance - and how to avoid them

  • How to arrange Purchase Order Finance - What paperwork do you need?

  • Key terms explained

Costs may be high

Purchase Order Finance may have substantial fees associated with it. You need to build the costs into your quotes to ensure your orders remain profitable.

Suitable for high margin business

Purchase Order Finance may not be suitable financing for low-margin businesses - call Rangewell to ensure a solution is suitable for your sector.

You must work with creditworthy businesses

Purchase Order Finance can be available for virtually any business, but it does require your customers to be fully creditworthy.

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