Purchase Order Financing up to $5,000,000
Your supplier gets paid so you can fulfil the order. For businesses that have won work larger than their working capital, secured by the order and the creditworthiness of the customer behind it.
Start an applicationPurchase order financing pays your supplier directly so you can fulfil a confirmed customer order you do not have the working capital to produce. Voxen places facilities up to $5,000,000 per order for Canadian businesses. It is underwritten on three things: a confirmed order from a creditworthy buyer, a supplier who can actually deliver, and a gross margin wide enough to carry the cost. It is repaid when the customer pays, often by converting the completed invoice into factoring.
What is purchase order financing?
Purchase order financing funds the cost of fulfilling an order you have already won. The lender pays your supplier — usually directly, often by letter of credit or wire against shipping documents — the goods are produced and delivered, you invoice the customer, and the facility is repaid out of that payment.
It solves a specific and painful problem: winning work too big to deliver. A confirmed order from a national retailer or a government buyer is the best thing that can happen to a growing business and the fastest way to run out of cash, because the supplier wants paying long before the customer does.
The underwriting is unusual in that it looks mostly past you. What matters is whether your customer will pay, whether your supplier will deliver, and whether the margin on the order covers the financing cost with room left. A business with a weak balance sheet and a strong order from a strong buyer is a better file here than the reverse.
Purchase order financing covers the cost of goods, not overhead, payroll or marketing. It is normally the first half of a two-step structure: purchase order financing produces the goods, then invoice factoring advances against the invoice once it is issued, which is what repays the purchase order facility.
Best for these business situations
- A confirmed order larger than the business can fund from cash flow
- Importers and resellers who must pay a supplier before shipment
- Suppliers to national retailers, distributors or government buyers
- Manufacturers needing raw materials against a firm contract
- Businesses whose growth is constrained by supplier payment terms
- Seasonal spikes where one order dwarfs the rest of the year
- Companies that would otherwise turn down work they have already won
- Exporters fulfilling a foreign order on documentary terms
Less suited to
- Speculative production with no confirmed customer order behind it
- Orders where the gross margin is too thin to carry the financing cost
- Customers whose credit cannot be verified or is genuinely weak
- Service contracts with no goods and no supplier to pay
- General working capital needs, which a line of credit serves better
How it works
- Send the order — We need the confirmed purchase order, your supplier's quote or proforma invoice, and who the end customer is. The margin between the two is the first thing anyone looks at.
- Supplier paid directly — Once the customer's credit and the supplier's capacity check out, the lender pays the supplier — commonly by letter of credit or against shipping documents rather than cash upfront.
- Deliver, invoice, repay — Goods ship, you invoice the customer, and the facility is repaid from that payment. Where the customer's terms are long, the invoice is usually factored so you are not waiting on the money twice.
Purchase order facility structure
| Facility Size | Up to $5,000,000 per order |
|---|---|
| Coverage | Supplier cost of goods; not overhead or payroll |
| Cost | Quoted per order, priced on time to payment |
| Gross Margin Required | Typically 20% or better on the order |
| Payment Method | Direct to supplier, often by letter of credit |
| Underwriting Basis | End-customer credit and supplier capacity |
| Repayment | On customer payment, frequently via factoring |
| Time to Funding | Days once the order and supplier are verified |
At a glance
| Per Order | Up to $5M |
|---|---|
| Paid Directly | Supplier |
| Repaid | On delivery |
Frequently asked questions
How is purchase order financing different from invoice factoring?
Timing. Purchase order financing happens before the goods exist — it pays the supplier so the order can be produced. Factoring happens after delivery, advancing against an invoice already issued. They are two halves of the same cycle, and businesses commonly use purchase order financing to make the goods and factoring to bridge the customer's payment terms afterwards.
Does my own credit matter?
Less than usual, and that is the point of the product. The lender is underwriting your customer's ability to pay and your supplier's ability to deliver. Your own file still matters for fraud and performance risk, but a thin balance sheet is not the disqualifier it would be on a term loan.
What margin do I need on the order?
Enough that the financing cost does not consume the profit. Around 20% gross margin is a common floor, and the wider the margin, the easier the file. If the order is thin-margin volume work, purchase order financing can turn a small profit into no profit, and the honest answer is often not to finance it.
Will my customer know about the financing?
Usually yes, particularly where the invoice is factored afterwards and payment is directed to the funder. In wholesale and government supply this is entirely routine. Where it would be awkward, say so at the start — the structure can sometimes be arranged differently, but it has to be raised before terms are set, not after.
Can it be used for domestic suppliers, not just imports?
Yes. Import transactions are the classic case because letters of credit fit them neatly, but domestic manufacturing and wholesale orders are financed the same way. What matters is that the supplier is verifiable and can perform, not where they are.
What documents do I need?
The confirmed purchase order from your customer, your supplier's proforma invoice or quote, six months of business bank statements, and enough about the end customer for their credit to be checked. For imports, add the shipping and inspection terms.
What if the customer cancels or the goods are rejected?
That is the risk the whole structure is built around, and it is why customer credit and supplier capacity are checked before anything is funded. Ask specifically what happens on a partial shipment or a quality rejection before you sign — every lender treats it differently, and it is the clause that matters most when something goes wrong.
Can a new business use purchase order financing?
Yes, more readily than most credit products, because the strength being underwritten is the order rather than trading history. A young business with a confirmed order from a large, creditworthy buyer is a legitimate file here where it would not be for a term loan.