Purchase order financing explained
A purchase order is an order form, issued by a buyer to a seller. When it’s accepted by the seller, it’s an agreement between buyer and seller on prices and quantities for a product or service.
Although a positive indication for a business, it can lead to problems for cash flow, primarily caused by two things.
Firstly, the business needs large funds to pay its suppliers to produce the goods for the order, a payment which is usually required prior to supplier production.
Secondly, the end customer usually has lengthy payment terms for the product they are receiving, in some cases this can be up to 120 days. Fulfilling this order requires the business to have substantial finance to fund production, until they get paid by the customer.
Purchase order finance, also known as 'PO Finance', provides funding for businesses with purchase orders to pay their suppliers and smooth out cash flow.
Purchase order financing is, therefore, an effective and popular option for those businesses which need a quick and effective way to finance their purchase orders.
It’s quick and easy to access funds, which means you can get the cash flow you need to get on with business. With MarketFinance, you get:
- Fast funding: quick funding decisions and set-up
- Hassle free experience: easy to use digital interface
- Help in real-time: personal customer support
- Straightforward costs: no hidden fees