What is purchase order financing and how does it work in Canada?
Purchase order financing pays your supplier so a confirmed customer order can be produced and delivered — up to $5,000,000 per order. It funds the goods before they exist, which is the gap factoring cannot cover.
Start an applicationThe facility exists for one situation: a signed order too large to fulfil from your own cash. The lender pays the supplier directly, the goods are produced and delivered, and the invoice issued on delivery repays the facility — often through invoice factoring, which then bridges the customer's payment terms.
Underwriting leans on the end customer's credit and the transaction's margin — as a working rule, gross margin around 20% or better is what makes the economics work. The order does most of the underwriting, which is why growing distributors and importers qualify for orders far beyond their balance sheet.
Purchase order financing is transaction-by-transaction; a business stocking ahead of general demand wants inventory financing instead. The comparison guide covers when each applies and how the two chain together on large orders.
What each product is for
| Merchant Cash Advance (MCA) | Fast working capital, cash-flow-driven approval |
|---|---|
| Business Line of Credit | Fluctuating cash needs, payroll smoothing |
| Invoice Factoring | B2B businesses with slow-paying clients |
| Equipment Financing | Trucks, machinery, kitchen, construction, tech |
| Bridge Loan | Short-term gap until a known future event |
| Term Loan | Growth, expansion, refinancing |
| Inventory Financing | Buying stock before it sells |
| Purchase Order Financing | Fulfilling a confirmed order you cannot fund |
| Acquisition Financing | Buying a business or partner buyout |