Purchase order financing<\/a> is a tool that CPG companies have been using for decades to finance the growth of their brands into businesses like Walmart, Walgreens<\/a>, and Bed Bath & Beyond<\/a>. It provides the ability to leverage purchase orders in order to finance 100% of your cost of goods. With the right purchase order financing partner, it is possible to deliver on time every time, regardless of the size of your orders.\u00a0<\/p>\n\n\n\n In its simplest definition, purchase order (PO) financing is where a financial firm will finance the production or acquisition of products for resale to credit worthy buyers. After receiving a non-cancellable purchase order from a customer (also known as the retailer), a lender will arrange for payment to be made directly to the supplier or manufacturer of the goods. <\/p>\n\n\n\n After the delivery of goods, the customer will issue payment (most likely direct to the purchase order financing company) based on the negotiated terms. The calculation of how much funding will be provided is typically somewhere between 75% and 85% of the resulting invoice amount from when the goods will be delivered to the customer(s). <\/p>\n\n\n\n With so many lending formats available today including accounts receivable lines of credit, term loans, cash advances, and asset based loans, it\u2019s important to find the specific program that suits the needs of your company. A high-growth company that is expecting large purchase orders from customers has a specific cash requirement for making large purchases. Unfortunately, most lending programs are not suitable to fill that need. <\/p>\n\n\n\n Many lenders are typically focused on past performance and historical data. Purchase order financing is structured in a way to assist with future deliveries. It allows brands to successfully fill large purchase orders without stressing out the cashflow that\u2019s needed to run the rest of the business. <\/p>\n\n\n\n More than anything else, it levels the playing field just a little bit for younger businesses. Now more than ever it\u2019s possible to increase revenues in a short period of time once a few major retailers want your products on the shelf. <\/p>\n\n\n\n This transactional type of financing allows for companies of all sizes to source capital as needed to take on these large opportunities. Walmart issues a $15,000,000 order for the holiday season? No problem. Target wants to roll out your product in all stores? Bring. It. On. Costco? Sure, we can handle that size of an order! <\/p>\n\n\n\n PO financing is a tool that can be used by most types of companies. As long as there is a non-cancellable purchase order from a credit worthy customer and a reliable source of product, you can use PO financing to produce those goods. Of course, there are some technical nuances to note. Candidates of this type of financing should not have any current Uniform Commercial Code (<\/strong>UCC) filings or competing liens on the inventory to be purchased or the resulting accounts receivable. <\/p>\n\n\n\n Oftentimes companies will look towards PO financing in order to supplement a current financing program. This could be the case if there is already a factor or asset based lender in place. The PO financing company will work alongside them to provide additional capital as needed to help a brand achieve its goals.<\/p>\n\n\n\n There is really only one correct way for PO financing to take place. <\/p>\n\n\n\n![\"Star](\"https:\/\/rangeme-blog-images.imgix.net\/blog\/wp-content\/uploads\/StarFundingVisual4.jpg?auto=format%2Ccompress&w=1024&h=1024&fit=crop\")
<\/figure>\n\n\n\nHow does PO financing work?<\/strong><\/h2>\n\n\n\n
![\"Star](\"https:\/\/rangeme-blog-images.imgix.net\/blog\/wp-content\/uploads\/StarFundingVisual1-1.jpg?auto=format%2Ccompress&w=1024&h=1024&fit=crop\")
<\/figure>\n\n\n\nWhy is PO financing important? <\/strong><\/h2>\n\n\n\n
Who can use PO financing? <\/strong><\/h2>\n\n\n\n
![\"Star](\"https:\/\/rangeme-blog-images.imgix.net\/blog\/wp-content\/uploads\/StarFundingVisual2.jpg?auto=format%2Ccompress&w=1024&h=1024&fit=crop\")
<\/figure>\n\n\n\nHow is PO financing set up? <\/strong><\/h2>\n\n\n\n