Levels Of Purchase Order Funding

There are 3 levels of PO Funding depending on how closely the company is involved in the manufacture of the goods.

1. The company is not directly involved and has a domestic or foreign supplier manufacture a finished product. The supplier will not start production or will not release the goods until they receive cash payment or, a Letter Of credit is issued to assure payment.

The PO funder will determine that the finished product matches the specifications of the PO and is shipped to the ultimate buyer within the contractually stipulated time.

The good news is that since the finished product will move directly from the producing supplier to the ultimate buyer, the financial condition of the company applying for PO Funding is not as critical. This is the easiest type of PO to be funded.

2. Most of the product is produced by an outside supplier and the partly completed product then moves to the company's facilities for final assembly or packaging. PO Funding may be possible, but the company's financial strength becomes more relevant.

3. The company fully manufactures the product itself. PO Funding will only be provided if the company is financially strong and has a good track record.

Companies that fall into this category already have traditional bank financing, but may have fully drawn down on their credit facility. These companies need further financing due to a sudden increase in new orders.

Cashwerks www.cashwerks.com is a Commercial Finance Consultancy providing intelligent capital solutions to start ups and mid-sized companies.
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