Purchase Order and Inventory Financing
Purchase order and inventory financing fund the gap between winning an order and getting paid for it. You have a confirmed order you cannot fulfil because the cash to buy stock or pay a supplier is not there yet. These products bridge exactly that gap.
They are distinct from most business lending in one important way: the money usually goes to your supplier, not to you.
Table of contents
Purchase order financing
The lender pays your supplier directly against a confirmed customer purchase order. Goods ship, your customer pays, the lender is repaid and you keep the margin. Because the lender is underwriting your customer’s creditworthiness as much as your own, a young business with a blue-chip customer can often qualify.
Typical terms run 30 to 90 days, and funding often covers most or all of the supplier cost.
Inventory and supply chain financing
Inventory financing advances against stock you already hold or are about to buy. Supply chain financing works from the other direction, letting you extend your own payment terms while your supplier still gets paid promptly.
Both suit businesses where cash sits in stock for months before it converts to revenue — importers, distributors, ecommerce sellers with long lead times from overseas manufacturing.
Trade and export finance
Cross-border trade adds shipping time, customs and currency to the cash conversion cycle. Trade finance covers pre-shipment costs, post-shipment receivables or both, and lenders in this space are usually comfortable with international customers in a way domestic lenders are not.
What it costs
Pricing is usually quoted as a fee per 30 days rather than an annual rate, commonly 1.5% to 3% per month depending on the customer’s credit quality and the length of the cycle. That looks high annualised, but the comparison that matters is against the margin on an order you would otherwise have to turn down.
Who this suits
- Businesses with confirmed orders larger than their working capital can fund
- Importers and exporters with long shipping and payment cycles
- Ecommerce sellers buying inventory months ahead of the selling season
- Distributors and wholesalers with cash tied up in stock
- Growing businesses whose biggest constraint is order size rather than demand
Where it is the wrong tool
These products do not work for service businesses with no physical goods, for speculative inventory bought without confirmed demand, or where your gross margin is too thin to absorb the financing cost. If your margin is 15% and financing costs 6% over the cycle, the economics get tight quickly.
Compared with the alternatives
- Accounts receivable financing comes after delivery, advancing against invoices already issued. PO financing comes before, funding the order itself. Many businesses use both across one cycle.
- Asset-based lending can include inventory in a broader borrowing base, and is usually cheaper if you qualify.
- A line of credit is more flexible but rarely large enough to fund a major order.
Lenders on Levr
Lenders in the Levr lender directory active in this space include Drip Capital for cross-border trade, 8fig for ecommerce inventory, Capitally for supply chain and PO financing, and Loop Financial for businesses trading internationally.
Find purchase order and inventory lenders
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Frequently asked questions
Do I need a confirmed purchase order?
For PO financing, yes — that order is the security. Inventory financing can sometimes work against stock levels alone.
Does the lender deal with my customer?
Often yes. The lender may verify the order directly and, in some structures, collect payment from your customer. Ask about this early if the relationship is sensitive.
Can a new business qualify?
More easily than with most products, because underwriting leans on your customer’s credit and the strength of the order rather than your trading history.
How quickly can it be arranged?
Once a facility is in place, individual orders are often funded within days. Setting up the facility takes longer.