What is Purchase Order Financing?

Get Inventory Now and Pay Later

In globalized commerce, it is difficult to pay for a large order of goods from overseas suppliers in advance of delivery of the goods and payment by its own customers. A purchase order finance solution will help an import company that must get suppliers paid to ship orders and without using company cash to do so. Kirksley can arrange this kind of customized inventory purchasing solution so that your critical orders are fulfilled without delay.


How Purchase Order Financing Can Solve Your Product Supply Challenges


A well-designed purchase order financing program can benefit your business that is importing wholesale materials or goods in many ways:


  • Meet growing customer demand despite having a long product supply chain from overseas
  • Increase your inventory and therefore revenue levels while preserving capital
  • Place and fulfill large volume orders to enable volume pricing and/or early payment discounts with suppliers
  • Keep your bank line of credit available for other company uses while your inventory is financed in this manner (e.g. use the business LOC for marketing of your increased inventory)

Purchase order financing bridges the long funding gap between the expenditure of money to acquire inventory from overseas and the receipt of money from buyers of the final merchandise. All kinds of inventory can qualify, such as raw materials, semi-manufactured goods, and finished goods across many industries. PO financing may be the exact solution needed to bring your business to the next level of success.


How Purchase Order Financing Works to Buy Inventory


The purchase and payment process (to order the goods, get the supplier paid, and the goods shipped) typically takes just 1-2 weeks and occurs in this order:

  • Submit application for PO financing with supporting documents
  • Receive a letter of intent and approval
  • Complete the PO financing agreement
  • Submit a purchase order for the goods to be covered under the program
  • Payment is made by the funding source to the supplier (90-100% of invoice paid to the vendor prior to shipment through an international trade letter of credit)
  • Typically the repayment back to the funding source is up to 90-day terms

Please note the purchase order financing program is generally open to larger companies having good credit, at least $5M in annual sales, and time in business oft least 3-5 years. The typical inventory purchasing level under such a program should be minimum $1M/yr and can reach as high as $100M/yr.

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A Purchase Order Financing program can be combined with an Accounts Receivable Financing program to create an end-to-end "Trade Finance" program. This combination allows funds generated from the discounting of receivables owed by credit-worthy customers to be applied towards the purchase of the inventory. In other words, Trade Finance will leverage your company's purchasing power without reducing your cash reserves. It closes the lengthy A/P to A/R funding gap typical in many extended supply chains that prevents business growth and flexibility.