Factoring Purchase Orders

Purchase order financing, or purchase order factoring, or purchase order funding is short term funding used to fulfill a sales contract with a creditworthy end-customer. The terms of the purchase order financing agreement are extremely specific, requiring the borrower to use funds for the purchase of certain materials and/or services needed to deliver goods to the end-customer.

For instance, an IT company might use purchase order factoring to purchase wire needed to construct a city block wire system ordered by a municipality.

How It Works

1. Your customer submits a purchase order to you.
2. You submit the purchase order to us for purchase order factoring.
3. The purchase order factor makes a partial payment on the purchase order. The payment is made to your supplier to cover the cost of the materials on your behalf.
4. The supplier delivers the materials to you for production.
5. You produce and deliver the product(s) to your customer.
6. You submit an invoice corresponding to the purchase order to the purchase order factor.
7. The purchase order factor submits the invoice to your customer on your behalf.
8. When the purchase order factor receives full payment on the invoice from your customer, the amount of the invoice advance and the factoring fee are deducted, then the remainder (the invoice reserve) is paid back to you.