Purchase Order Financing FAQs
What is Purchase Order Funding?
Purchase Order Funding is a financing option for businesses that need to cover the costs of producing or acquiring goods for resale. It is often used in conjunction with an accounts receivable factoring arrangement. For many growing businesses, PO Funding is a more desirable financing option than traditional bank loans.
What’s the difference between Purchase Order Funding and Purchase Order Financing?
There is no difference! The terms Purchase Order Funding, PO Funding, Purchase Order Financing, and PO Financing can be used interchangeably. We use the terms interchangeably throughout our website to reflect this.
How does Purchase Order Funding work?
Purchase Order Funding works in a few easy steps. Upon receipt of a qualified purchase order from your customer, STAR Funding will cover the cost of producing or acquiring those goods for resale. The goods are then shipped to your customer per their purchase order. An invoice is issued to your customer and STAR Funding is paid back by your Accounts Receivable Factor as the first advance against the resulting accounts receivable.
Do I need to have good personal credit for Purchase Order Financing?
No, a Purchase Order Financing transaction relies on the credit of the end customer and their ability to pay for goods. STAR Funding also considers the ability of our client to produce the goods and deliver as stated on the customer purchase order.
What documents should I submit to get approved?
Getting set up for PO Funding is easy. To start, basic financial and corporate information is all that’s needed. In order for STAR Funding to consider financing an order, our client must have a purchase order from their customer, the pro-forma invoice from their vendor, and an understanding of payment terms and lead teams. The more details a business presents when submitting a transaction, the easier it is for STAR Funding to execute it smoothly.
How much does Purchase Order Financing Cost?
PO Financing Rates can vary depending on the length and type of transaction. For example, a complex Work In Process has a higher cost of funding associated with it than PO Financing to purchase finished goods for resale.
How much do you advance against the Purchase Order?
STAR Funding will cover the costs of production or acquisition of goods up to 100% as long as the goods are pre-sold to credit-worthy end customers.
Can I buy products from more than one supplier?
Yes. When working with STAR Funding, you can buy items from multiple suppliers. Depending on where the goods are coming from and what the lead times are, it may be required that your customer allow for partial shipments. STAR Funding will evaluate the proposed transaction and provide whatever guidance necessary to help get the deal done for you.
Do you inspect goods prior to funding a transaction?
Yes. We always want to inspect goods prior to paying for them. When available, a third-party inspection company handles the inspection process. It’s important to note that not all third-party inspection companies are qualified in all areas. STAR Funding will help you select an inspection company that is most suited for your business—within reasonable timeframes and budgets.
How is PO Financing different from inventory finance?
In a PO Financing transaction the lender is purchasing products that are presold to an end customer. When financing inventory a lender will help purchase new inventory or lend against existing inventory that will be sold at a later date(hopefully).
Is purchase order financing for startups possible?
Of course it is. As long as there is a purchase order from a credit worthy customer and a reliable vendor. Some lenders may choose not to fund startups. Star Funding works with both new and existing businesses and will even consider funding the first transactions a business comes across.
Can you finance international purchase orders?
Yes, international purchase order funding is done in the same way we finance domestic orders. Depending on whom you are selling to we may request a letter of credit, shorter terms, or other accommodations to get comfortable with the transaction.
What info do purchase order financing companies need?
In order to evaluate a a transaction the PO Financing company will require all of the buy/sell information. Anything you have that helps show how products are being bought and sold will be important to the lender. This includes Purchase Orders from your customer, pro-forma invoices from your vendor, production schedules, etc.
Get Started with Purchase Order Financing Today
If your business is looking to get started with PO Funding, look no further. Talk to the team at STAR Funding today to learn more and to get started.