Purchase Order Financing
Your small business no longer has to turn away big orders because of cash flow restraints. Apply for purchase order financing to fulfil those orders and win repeat business.
- Compare a wide range of lenders and rates
- Check your eligibility in minutes
- Find out how much you could borrow
It's fast, free and won't affect your credit score







What is purchase order financing?
Purchase order finance is a type of short-term trade finance for businesses that don't have the working capital to use to fulfil large customer orders. Instead of depleting your own cash reserves and worrying about cash flow, PO financing advances you the money needed to buy materials or products for your customer's order.
This type of financing can offer small business owners the chance to grow quickly and never turn business away again.
How does purchase order financing work?
Purchase order financing usually follows these steps:
- Receive the purchase order for the large order
- Send the purchase order to the lender
- The financer makes direct payment to the supplier on your behalf
- The supplier sends the goods to you or the customer
- The goods are received, and you can invoice the customer
- The customer pays the lender directly
- The lender deducts their fee and sends the outstanding payment balance to you

Pros of purchase order financing
- Grow your business quickly (particularly if you're a small business). By accepting large orders, you can make more money quickly. And with PO financing, you're not out of pocket at any stage.
- Fulfil big orders without worrying about cash. Imagine you receive a large customer order, but it’s going to cost you a small fortune (more than you have in cash reserves) to pay for the goods and materials you need to complete the order. PO financing can bridge the short-term cash flow gap.
- Quick access to business finance. The lender can provide you with the funding in as little as 24 hours in some cases.
- You don’t need collateral. Generally, the purchase order is taken as security for this type of trade finance. That means you don’t have to risk any of your high-value assets.
- Easier to qualify for. If you’re a new company or you have bad credit and are struggling to secure financing, this could be a viable option. The lender is more interested in the creditworthiness of your suppliers and customers than you.
- No monthly loan repayments. Because your customer pays the lender directly, you don’t have to repay the loan each month. Making managing your outgoings really straightforward.
Cons of purchase order financing
- Your customers need good credit. To lessen the lender’s risk, they only want to work with creditworthy customers. That means, if you find out your customer has bad credit, you won’t be able to sell their invoice.
- It’s only available if you sell physical goods. If you’re a service business, you won’t be eligible for purchase order financing.
- A purchase order financing agreement can get expensive. Although there are no monthly loan repayments, you do pay a monthly fee of up to 6%. So let’s say your customer delays invoice payment by two months, you end up paying the lender double the fees. It can get expensive pretty quickly.
- It can affect customer relationships. The customer will know you’re working with a lender to sell their invoice, which can affect their perception of your business — it can seem as though you’re struggling financially.
- Only really suitable for higher-margin businesses. If you have razor-thin margins, lenders might not accept your loan application. That’s because they look for an order margin of around 20% because the monthly fees are so high, so you might struggle to see a profit.
- You can’t spend it how you like. Purchase order financing has limited use; you can only use it to cover the costs to fulfil that particular order. You can’t use it for advertising your business or paying staff wages, for example.
Purchase order financing for startups
Accessing finance to grow your business can be tricky if you’re a startup. As a new business, you don’t have a lot of trading history or credibility yet to suitably impress lenders. But there’s good news: you can still apply for purchase order financing as a startup business. As the lender is more interested in the creditworthiness of your customers (and you’re not repaying the funds back yourself), they’re more likely to accept newer businesses.
Purchase order financing rates
You can expect to pay a fee between 1.6% and 6% to the lender when accessing purchase order financing. The lender takes this fee from your customer's invoice payment, before passing the outstanding balance onto your bank account.
Alternatives to a purchase order loan
If you think the fees are too high or you’re looking for a loan you can spend elsewhere in your business, then purchase order financing might not be the right fit for you. Here are some alternatives:
Credit cards
A business credit card is a type of revolving credit that can help you bridge the gap between paying suppliers and receiving customer payments. You usually get an interest-free purchase period that you can use to better manage payments. Once you spend funds and repay, they’re immediately available for you to use again.
Be sure to pay the balance of your credit card each month to avoid paying high interest rates.
Invoice finance
Invoice finance is similar to purchase order finance in that you sell your invoice to the lender and receive an advance payment. Just like PO financing, the invoice is used as collateral in this transaction, with the lender chasing the customer for payment. Once your customer pays, they take their fee and transfer the remaining balance to your bank account.
Small business loans
If you’re looking for a loan that enables you to apply and receive funds as a lump sum, you might be better off applying for a small business loan. These loans can be either secured or unsecured, and you can access up to £500,000 or more. You can spend these loans on anything business-related — staff, premises, marketing, stock, etc. Repay the loan in monthly instalments, with interest.
How to apply for purchase order financing
Starting your online application is easy. Start by finding and comparing eligible purchase order financing lenders through our comparison tool. This helps you find the best financing fit for your business needs.
If you like the look of a loan offer, simply click to expand the product box and learn more about it, then proceed directly with the lender to carry on with your loan application.
Comparing lenders takes seconds — our platform is free, self-serve, and getting a quote doesn’t affect your credit score.
Adrian T
5/5
Amazingly fast, efficient service, minimal paperwork. So much faster than my business bank of twelve years.