Purchase Order Finance is generally related to a specific transaction or purchase order. Financing purchase orders, provides cash to allow a business owner to acquire the raw materials or supplies needed to complete a customers order. Typical businesses that benefit from Microplus’ PO finance are wholesalers, manufacturers, suppliers, and contractors.
You may be asking yourself, ‘How is Purchase Order financing different from Factoring?’
Even though the two forms of funding have many similarities, they do have a few big differences:
- Invoice Factoring generally will not provide funding for the full value of the company’s account receivable. Whereas, Purchase Order financing can fund up to 100% of the purchase order value.
- Purchase order financing is capital in order to produce the good or buy the inventory a business many need, whereas invoice factoring is funding after the goods have been shipped or service performed and a business has a valid invoice in hand.
- The working capital obtained from invoice factoring can be applied to any project within the business. Funding received through purchase order financing can only be applied to that particular purchase order.
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