FAQs about Purchase Order Financing

1. What is Purchase Order Financing?

Purchase order financing is a short-term funding option that allows businesses to pay suppliers upfront for goods required to fulfill large customer orders. Instead of waiting for customer payment, the financing covers supplier costs, enabling businesses to deliver orders on time without cash flow interruptions including financing the invoiced receivable up to 90 day terms.

‍

2. Who can benefit from Purchase Order Financing?

PO financing is ideal for:

• Wholesalers, distributors, import/export companies and service providers.
• Manufacturers with large bulk orders
• Resellers handling high-volume seasonal orders
• Businesses growing faster than their available working capital

‍

3. How does PO Financing work?

1. Must establish an invoice factoring relationship with current customers first.
2. You receive a purchase order from a creditworthy customer.
3. 1st Commercial Credit pays your supplier directly for goods.
4. Goods are delivered to your customer.
5. The resulting invoice is factored or collected, and the financing is repaid.

‍

4. What types of Purchase Orders qualify?

• Finished Goods PO Finance – For ready-to-ship products, including imports. ‍
• Light Assembly PO Finance – For minor assembly, packaging, or labeling. ‍
• Production Finance – For raw materials and manufacturing (for qualified existing clients).

5. How quickly can I get funded?

Setup can be completed in 5 to 10 business days, with supplier payments made immediately after approval and documentation.

‍

6. What are the typical costs for PO Financing?

Rates range from 1.5% to 5% per 30 days, depending on transaction risk, product type, and order cycle time.

‍

7. What are the eligibility requirements?

• U.S.-based business (excluding CA, NY, and LA)
• At least 1 year in business
• Current on taxes and rent
• Factoring receivables with 1st Commercial Credit
• Minimum 25% gross profit margin
• Purchase orders from creditworthy buyers

‍

8. Can startups qualify for PO financing?

Yes, if they have existing receivables to factor and recurring business with customers, purchase order from a reliable customer, meet supplier relationships requirements, and use factoring with 1st Commercial Credit.

‍

9. How is PO financing different from a bank loan?

• Approval is based on the creditworthiness of your customer rather than your company’s financial history.
• No long-term debt is incurred, it’s a transactional, short-term advance.
• Faster funding compared to bank underwriting timelines with higher credit limits.

10. What documentation is required for approval?

Common requirements include:

• Client must be eligible for invoice factoring and credit worthy customers
• Signed purchase order
• Supplier’s proforma invoice
• Customer credit terms are under 90 days
• Business incorporation documents
• Proof of insurance (when required)
• Profit Margin must be more that 25%

‍

11. Can PO financing be used for international trade?

Yes, 1st Commercial Credit funds import transactions for US based companies, covering supplier costs, shipping, and duties for cross-border deals.

‍

12. What happens if my customer cancels the order?

The business is responsible for repaying the financing or liquidating the goods. 1st Commercial Credit mitigates this risk by only financing POs for creditworthy customers and resalable products.

‍

13. Can PO financing cover partial orders or multiple suppliers?

Yes, financing can be structured to cover specific suppliers, partial shipments, or staged payments tied to production milestones.

‍

‍14. What makes a PO financing transaction successful?

• Reliable supplier relationships
• Realistic delivery timelines
• Strong customer credit profile
• Sufficient profit margins (25% or higher)

15. Can PO financing be combined with invoice factoring?

Yes, once goods are delivered and invoiced, the receivable can be factored, allowing continuous cash flow for the next order.

‍

16. Is there a minimum transaction size?

Generally, PO financing is considered for orders of at least $100,000, though exceptions may be made for recurring smaller orders with strong margins.

‍

17. Can PO financing be used for services?

Yes, unlike most lenders, 1st Commercial Credit considers job orders a viable form of transactional funding to cover payroll until the work is completed, particularly in industries such as janitorial services, temporary staffing, and security guard services.

‍

18. Are there geographic restrictions?

Yes, PO financing is available to U.S.-based companies, excluding California and New York.

‍

19. What industries commonly use PO financing?

• Temporary Staffing and Security Guards
• Importers and Distributors
• Apparel and Textiles
• Food and Beverage  
• Industrial equipment
• Manufacturers

‍

20. How do I start the application process?

You can apply directly through 1st Commercial Credit’s online application. Most clients receive a pre-approval decision within 24–48 hours after submitting documentation.