Purchase Order Factoring

Purchase order factoring allows businesses to raise working capital against qualifying purchase orders. By using this system the business can grow even if it does not have much capital behind it.

Because the business can get normally around 80% of the income from the purchase order up-front, they can pay for the products, raw materials or staffing costs that are necessary to produce the product.

Purchase order factoing is a variation of The main difference is that the product has not as yet been delivered. For this reason, the risks of the transaction will generally be perceived by the funder as greater, so they may have higher qualifying criteria than for standard invoice discounting. These risks can be reduced if the business has multiple customers, or their customer base is considered to be very credit worthy. The financier will still want to satisfy themselves that the business has the capacity to fulfill the orders.

The client would normally be sending out it's invoices with the factor's payment details.

This kind of financing would suit an under-capitalised business that was importing products that needed to be paid for in advance. With a facility like this in place, they could raise sufficient funds to pay the supplier each time an item is ordered, then, when the customer pays, they receive their profit less the cost of the finance.

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