Side by side

Choose Inventory Financing when

• You are stocking ahead of a season or sustained demand
• Sales come from many customers, none of them pre-committed
• Supplier bulk pricing or shipping economics reward larger buys
• The need is a revolving stock position, not one transaction

Choose Purchase Order Financing when

• A specific customer has issued a confirmed order
• The supplier requires payment before production or shipment
• The order is large relative to your available cash
• The end customer is creditworthy and the margin covers the cost

When both make sense

Product businesses often need both at different moments of the same year: purchase order financing to deliver the large confirmed orders, inventory financing to hold the stock that serves everyday demand between them.

The underwriting is different enough that one facility rarely stretches to cover the other job — an inventory advance is sized to stock value, a purchase order facility to a transaction. Structuring each for its actual purpose costs less than forcing one to do both.

Frequently asked questions

Which is easier to qualify for?

Purchase order financing, when the order and the end customer are strong — the confirmed order does most of the underwriting work. Inventory financing depends on the stock itself: how liquid it is, how it is valued, and how reliably it turns. Commodity stock with a resale market supports a better facility than seasonal or perishable goods.

Can I finance inventory I already own?

That is precisely what inventory financing does — it advances working capital against stock already in your warehouse, the same way equipment refinancing advances against owned equipment. The facility size follows the appraised value and turnover of the stock.

What happens when the purchase order is delivered?

The invoice issued on delivery typically repays the purchase order facility — often through invoice factoring, which advances against the receivable. The three products chain naturally: purchase order financing produces the goods, the invoice pays out the facility, and factoring bridges the customer's payment terms.

Related

• Chartered bank term loan vs Business Line of Credit — A chartered bank term loan is cheaper and should be your first call if the business is bankable — two or more years of history, clean financials and strong credit.
• Invoice Factoring vs Merchant Cash Advance (MCA) — If the business invoices other businesses, factoring is almost always the cheaper answer — it advances money the business has already earned, priced from 1.5% per 30 days, and creates no debt.
• Term Loan vs Merchant Cash Advance (MCA) — A term loan is the cheaper instrument and the right one whenever the file can carry it — fixed payments, a defined end date, and pricing quoted as an annual rate.
• Equipment Financing vs Term Loan — If the money is going into a specific piece of equipment, finance the equipment.
• Purchase Order Financing vs Invoice Factoring — These are not alternatives — they are consecutive.
• Inventory Financing vs Business Line of Credit — A line of credit is underwritten on the business as a whole and can be spent on anything; inventory financing is underwritten on the stock and is used to buy stock.
• Equipment Financing vs Business Line of Credit — Buy the machine on equipment financing and keep the line of credit for working capital.
• Chartered bank term loan vs Invoice Factoring — If your file is bankable — strong credit, two-plus years of history, clean financials — the bank loan is the cheaper instrument and you should pursue it first.
• Chartered bank term loan vs Merchant Cash Advance (MCA) — These sit at opposite ends of the same spectrum.
• RBC Royal Bank business operating line vs Business Line of Credit — If RBC will approve the operating line inside your timeline, take it — the rate on a bank line is lower than anything a non-bank lender can price.
• TD Canada Trust business line of credit vs Business Line of Credit — For a business with filed statements and clean guarantor credit, a TD business line of credit is cheaper than any non-bank alternative and should be the first application.
• Scotiabank receivables-secured operating facility vs Invoice Factoring — A Scotiabank receivables facility is the cheaper way to finance invoices and the right call if your receivables fit a bank margin formula: many customers, none dominant, all under ninety days, all easy to credit-check.
• BMO Bank of Montreal equipment term loan vs Equipment Financing — If BMO will write the equipment term loan and the delivery date allows, take the bank rate — nothing else prices lower on a long-lived asset.
• CIBC business term loan vs Term Loan — A CIBC business term loan is the cheapest way to fund a defined, one-time capital need, and a bankable file should apply there first.
• National Bank of Canada receivables-secured operating facility vs Invoice Factoring — For a Quebec business with a diversified receivables book, a National Bank operating facility is cheaper than factoring and easier to run in French from end to end.
• Desjardins equipment financing through a caisse vs Equipment Financing — If you are an established Desjardins member and the caisse will finance the machine, that is the cheapest capital available and the relationship is worth protecting.
• Vancity business line of credit vs Business Line of Credit — For a British Columbia business whose work fits Vancity's mandate, a credit union line of credit is cheaper than a non-bank facility and worth the application.
• ATB Financial equipment term loan vs Equipment Financing — For an Alberta business buying new equipment, ATB is a genuinely well-matched lender and should get the first quote — provincial focus means the underwriting understands your cycle.

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