PO Financing
Never turn down a big order because of cash flow
$25K – $10MFunding Range
Varies by transactionSpeed
Never turn down a big order because of cash flow
Purchase-order financing can pay a supplier against an eligible confirmed order from a commercial or government buyer. It is transaction-specific funding rather than unrestricted operating cash. Bay Street Lending helps assess buyer quality, supplier performance, margin, and repayment arrangements before matching a request to a suitable provider.
When a large order comes in and you don’t have the capital to cover supplier costs, PO financing may help cover eligible supplier costs when the transaction supports it.
Buyer credit is central, alongside supplier capability, order terms, margins, existing liens, and the full transaction. A strong buyer alone does not guarantee funding.
The financing company pays your supplier on your behalf — you never touch the money. This reduces risk and speeds up the process for everyone involved.
Fulfill a large retail or wholesale order, Cover raw material costs for a new contract, Scale production without draining cash reserves, Accept government or enterprise purchase orders, and Bridge the gap between order and payment.
Don’t meet every requirement? Apply anyway — we evaluate the full picture.
Share buyer terms, supplier quote, landed costs, and the delivery schedule for transaction review.
After approval and documentation, the provider pays approved supplier costs under the agreed conditions.
Customer collections or an approved receivables facility repay the provider; remaining proceeds follow the agreed payment waterfall.
Purchase order financing fills the gap between winning an order and getting paid for it. A line of credit lends against receivables and inventory you already have. A PO provider funds before either exists, against a creditworthy customer’s commitment to buy. Every transaction runs through the same stages:
| Stage | What happens | What the provider checks |
|---|---|---|
| 1. The order | Your customer issues a firm purchase order | The customer’s credit, and whether the order can be cancelled |
| 2. The supplier | You get a quote or pro-forma invoice for the goods | The supplier’s record of delivering on time and to specification |
| 3. Funding | The provider pays the supplier directly, sometimes by letter of credit for an overseas supplier | That the order’s gross margin covers every fee with room to spare |
| 4. Delivery | Goods ship, often straight from the supplier to your customer | Inspection, shipping documents and proof of delivery |
| 5. Invoicing | You invoice the customer; the receivable is assigned to the provider or sold to a factor | That the customer acknowledges the invoice |
| 6. Collection and settlement | The customer pays; the provider deducts its advance and fees and sends you the balance | That payment lands in an account the provider controls |
Two features set it apart from other business financing. The provider pays the supplier, not you, so the money never passes through your account. And each order is its own transaction, approved, funded and settled separately. That is what makes PO financing available to a business whose balance sheet could not support the order on its own.
A PO provider takes two risks: that the supplier fails to deliver, and that the customer fails to pay. The businesses that qualify are the ones whose order removes most of the rest.
| Usually fits | Usually needs a different structure |
|---|---|
| Distributors and wholesalers reselling finished goods | Service businesses, where there are no goods to finance |
| Importers and consumer brands using contract manufacturers | Manufacturers producing in their own plant with their own labor |
| Government contractors supplying products on a firm award | Orders that can be cancelled, returned or sold on consignment |
| Customers with strong, verifiable credit | Start-up customers or customers with weak or unknown credit |
| Orders with healthy gross margin | Thin-margin orders, where fees would consume the profit |
| A supplier with a delivery record | Custom or first-run production with a high risk of rejection |
The margin test is the one owners underestimate. A provider will not fund an order whose margin leaves little room after its fee and the factoring cost that follows, because a shipping delay or a partial rejection would push the order underwater. Run the margin after goods, freight, duties, insurance and financing before you ask.
Ask for a transaction-specific written quote. Confirm the fee base, charging period, minimum charge, extensions, due-diligence costs, and any invoice-factoring charges after delivery. A periodic fee is not the same as a total transaction cost or an APR.
Cost usually comes in two layers. The PO fee runs on the supplier payment for each period the money is out, commonly per 30 days. Once the goods are invoiced, the receivable is factored or pledged, and that carries its own cost until the customer pays. Total cost therefore depends on three things: how much of the supplier cost is advanced, how long production and shipping take, and how long your customer takes to pay.
For illustration, take a $250,000 order from a national retailer with a $150,000 supplier cost, so $100,000 of gross margin. Production and shipping take about 60 days, and the retailer pays about 60 days after delivery. At an assumed PO fee of 2% per 30 days, the $150,000 supplier payment costs $6,000 for the two production periods; a third period adds $3,000. An assumed factoring cost of 3% on the $250,000 invoice adds $7,500. You fill an order you could not otherwise have accepted and keep about $86,500 of the $100,000 margin before freight and your other costs. These are hypothetical assumptions, not Bay Street pricing or a market range.
Plan the repayment before you commit: confirm whether the buyer pays the PO provider directly or an approved receivables facility repays it after delivery, include every facility’s fees and reserves, and do not assume an invoice advance will cover the PO balance without checking both agreements.
The two cover different stages of the same cash cycle. A business line of credit advances once you hold inventory or invoices. PO financing covers the step before: paying the supplier before the goods exist or ship.
| Purchase order financing | Line of credit | |
|---|---|---|
| What is financed | Supplier cost for one confirmed order | Receivables, inventory and general working capital, on a revolving basis |
| When money is advanced | Before goods are made or shipped | Whenever you draw, up to the limit |
| Main credit question | Will this customer pay, and will this supplier deliver? | Is your business sound? |
| Approval | Each order separately | Once, then redrawn as you repay |
| Repaid from | That order’s collection | Collections generally |
| Best for | An order larger than your current capacity | Recurring, predictable working capital needs |
Say a distributor with a $250,000 line has $60,000 of availability left and lands a $400,000 first order from a new retail account. The supplier needs $240,000 before it ships. The options:
| Option | What happens | Result |
|---|---|---|
| Turn the order down | No new financing | No cost, and the retail account goes to a competitor |
| Ask for a temporary increase on the line | The lender advances beyond the current limit | Cheapest if granted; lenders often decline a request four times the remaining availability |
| PO financing for this order | The provider pays the supplier $240,000; the invoice is factored on delivery | The order is filled, and financing costs come out of its gross profit |
| Resize the line | A larger facility sized for orders of this size | The right answer if they will recur, but rarely in place in time for the first one |
The usual sequence is both: PO financing for the first order, while a larger line is put in place for the repeat orders that follow. Bay Street places both, so the comparison is real rather than hypothetical.
A PO provider needs first claim on the goods it pays for and the receivable they produce. If a bank or another lender already holds a blanket lien on your business assets, recorded as a UCC filing, the PO provider will need that lender to subordinate or carve out the financed order, usually through an intercreditor agreement. Some lenders agree readily; some do not. That conversation is far easier before you commit to the supplier than after, so bring your debt schedule and existing UCC filings to the first discussion.
PO financing pays a supplier for finished goods that ship to your customer. It does not fund wages, subcontractors or in-house fabrication, so a services or construction contract rarely fits. A signed contract is not collateral on its own either: until the work is done and billed, there is nothing a provider could collect if the job stalled.
What does fund a contract ramp: a mobilization payment or materials deposit negotiated into the contract before you sign; invoice factoring once progress billings go out, including factoring for government contractors and construction invoice factoring; revenue-based working capital for payroll and materials while you wait on the first invoice; and equipment financing for machines the contract requires.
Prepare the customer order and contract, supplier quote or pro-forma invoice, landed-cost breakdown, delivery timeline, buyer payment terms, recent bank statements and financials, a customer list showing concentration, and your debt schedule with any existing UCC filings. Setup timing varies with verification and legal arrangements. Discuss the order before committing to a supplier based on an assumed funding date.
Bay Street Lending is a commercial finance broker. Requests start at $25,000. Available structures, cost, collateral, guarantees, and timing depend on the lender and the complete file; submitting an inquiry is not an approval.
No. Providers also review buyer credit, supplier capability, margins, delivery and acceptance terms, collateral, and repayment arrangements.
It commonly pays approved supplier costs directly. It is not an unrestricted cash advance for unrelated overhead.
Timing depends on buyer and supplier verification, transaction complexity, documentation, and any related receivables facility. Confirm the expected date for the complete file before making commitments.
Same product under two names. In PO factoring, also called purchase order factoring, the provider pays your supplier against a confirmed customer order. After delivery, the invoice to your customer is usually factored and your customer's payment repays the PO advance, which is where the factoring name comes from.
Typically 1.5–6% of the funded amount per transaction, depending on your buyer's credit, the order size, your margin, and how long the money is outstanding. Many providers charge per 30 days, so a delayed shipment adds cost. Get the fee base, charging period, minimum charge, and any factoring fees after delivery in writing before you commit.
There is no universal threshold. Calculate the margin after goods, freight, duties, insurance, financing, and possible delays, then apply the provider’s actual requirements.
Often, yes. A PO provider underwrites your customer’s credit and your supplier’s reliability more heavily than your own score, so a creditworthy buyer and a solid supplier can carry the order. Existing liens, tax liens and judgments still matter, because the provider needs a clear first claim on the goods and the receivable.
Usually not. Providers advance against the supplier’s cost, not your sale price, and may not cover all of that cost. You keep the margin left after the PO fee and any factoring cost on the invoice.
Rarely. PO providers pay third-party suppliers for finished goods; in-house production involves labor and overhead a provider cannot control or recover. Manufacturers are usually better served by a line of credit, invoice factoring once goods are billed, or equipment financing.
Usually, yes. The provider typically verifies the order with your customer, and the customer is directed to pay the provider or its factor. Most large retailers, distributors and government buyers are used to this.
Fees keep running while the money is out, and the provider will look to you to cover any shortfall. That is why providers check the supplier as closely as the customer, and why thin-margin orders are declined.
Often, but your line lender will usually hold a blanket lien, and the PO provider needs first claim on the financed goods and receivable. That takes the line lender’s consent, typically through an intercreditor agreement or a carve-out for the order.
Generally not. It pays a supplier for finished goods, so labor, subcontractors and fabrication fall outside it. Contract work is usually funded by a customer deposit, invoice factoring once billings go out, or working capital while you wait on the first invoice.
One application, no credit impact, and a dedicated specialist to walk you through your options. See what you qualify for in minutes.