Purchase order finance (PO Financing) is a method of financing inventory, but under a fairly specialized and narrow set of conditions. It is commonly combined with factoring , but can be done separately.
The terms of the purchase order determine the feasibility of using purchase order finance. A purchase order (PO) is a commercial document issued by a buyer to a seller, indicating types, quantities, and agreed prices for products or services the seller will provide to the buyer. A purchase order is used to control the purchasing of products and services from external suppliers. Sending a purchase order to a supplier constitutes a legal offer to buy products or services.
Acceptance of a purchase order by a seller usually forms a one-off contract between the buyer and seller, so no contract exists until the purchase order is accepted. At that point, the purchase order becomes a contract that can be enforced and assigned. The legally binding nature of the purchase order, combined with the specificity of the terms, permits a p.o. financier to take an assignment of the purchase order in connection with the financing of the underlying goods.
P.O. financing is a valid short-term solution to a liquidity problem caused by an unusually large order with a solid gross margin. A longer term liquidity problem is better solved with either mezzanine or equity capital.
The ideal conditions under which you can obtain financing for acquiring inventory are as follows:
If you are having difficulty finding financing for the fulfillment of orders, talk to us about PO finance.
For more see:
“Middle Market Investment Bank of the Year - USA” 2016 - Acquisition International
“Investment Banking Boutique of the Year - North America” - M&A Today
“Investment Banking Firm of the Year” 2015 - Finalist” - The M&A advisor
“Investment Banking Boutique of the Year” - 2014/15 - Acquisition International
“Best Aerospace-Defense Investment Bank – USA” 2015 - Acquisition International
“Best Boutique Investment Bank – USA” 2014 - Wealth & Finance Magazine
“Capital Raising Investment Bank of the Year - 2014” - Acquisition International Magazine
“Investment Banking Boutique of the Year - 2013” - Acquisition Finance Magazine
“2013 Investment Banking Boutique of the Year - USA” - InterContinental Finance Magazine
“Agribusiness M&A Advisor of the Year 2014 – USA” - Corporate Intl Magazine
“Transactional Intellectual Property Consultant of the Year” - Acquisition International Magazine