The order
- A copy of the confirmed purchase order
- The customer placing it, and their payment terms
- What the supplier needs paying, and when
- Delivery timescale and any milestones
Purchase order finance
Fund the cost of fulfilling a confirmed customer order, before you deliver or invoice. Your supplier gets paid, you get to take the contract.
- Pay suppliers against a confirmed customer order
- Assessed on your customer's credit strength, not just yours
- Also called PO finance, purchase order financing or PO funding
- Independent commercial finance broker
Last updated: August 2026
What is purchase order finance?
Purchase order finance funds the cost of fulfilling a confirmed customer order before you have been paid for it. The lender pays your supplier so the goods can be produced or bought. You deliver to your customer, raise the invoice, and the lender is repaid when that invoice settles.
It is also called PO finance, purchase order financing or PO funding. The names are interchangeable.
For example, a distributor wins a £200,000 order from a national retailer but needs to pay its supplier £120,000 before anything can ship. Purchase order finance covers that £120,000. The goods are made and delivered, the retailer is invoiced, and when it pays, the facility clears and the margin comes back to the business.
The distinguishing feature is who the lender is really relying on. On most funding, the assessment is about your business. Here it is largely about the company that placed the order, because they are the source of repayment. That is why a young company holding a firm order from a strong customer can sometimes access this when a conventional loan would be declined.
How purchase order finance works
Five steps from winning the order to clearing the facility.
- 01
Win a confirmed order
You receive a firm purchase order from a creditworthy business customer. The order needs to be confirmed, not a quote or an expression of interest.
- 02
We assess the order and the customer
Lenders look hardest at who placed the order. A strong end customer is what makes the funding work, alongside your ability to actually fulfil it.
- 03
The lender pays your supplier
Funds go directly to your supplier to cover production or purchase costs, rather than into your account. This is a deliberate feature of the product, not a restriction on you.
- 04
You fulfil and invoice
Goods are produced or bought, delivered to your customer, and you raise the invoice as normal.
- 05
The invoice settles and the facility clears
Your customer pays, the lender recovers the advance and its fee, and the balance comes to you. Many businesses roll straight into invoice finance at this stage to bridge the payment terms.
What you'll need
The order and the customer behind it matter more than your balance sheet, so lead with those.
Your business
- Companies House number and trading name
- Date of incorporation and length of trading
- Annual turnover and sector
- Last 6 months of business bank statements
- Most recent year-end accounts, or management accounts if newer
Supplier and fulfilment
- Supplier name, location and payment terms
- Whether you have traded with them before
- Evidence you can fulfil the order, such as previous similar contracts
- Whether any goods are being imported
We do not run a credit search at the enquiry stage. A formal search happens only once you accept a lender's offer.
Common uses of purchase order finance
Almost always the same underlying problem: a good order the business cannot currently afford to fulfil.
- An order larger than you can fund
- The most common case. You have won a contract that is bigger than anything you have delivered before, and the supplier cost alone would exhaust your cash.
- Seasonal or one-off spikes
- A retailer places a large pre-Christmas order, or a tender lands alongside your existing commitments. The work is profitable, the timing is the problem.
- Importing goods against an order
- Overseas suppliers often want payment before shipping. Purchase order finance covers that gap, and can sit alongside trade finance where letters of credit are involved.
- Growing without diluting equity
- Funding tied to specific orders lets a business scale on contracts it has already won, rather than raising capital against forecasts.
Purchase order finance vs invoice finance vs trade finance
These three are routinely confused. They fund different moments in the same trading cycle.
| Feature | Purchase order finance | Invoice finance | Trade finance |
|---|---|---|---|
| When it funds | Before you deliver | After you invoice | Before or during shipment |
| What it pays for | Your supplier's costs | Cash against your raised invoice | Goods crossing a border |
| Who the lender credit-checks | Mainly your end customer | You and your customers | You and your counterparty |
| Funds paid to | Your supplier, usually direct | Your business | Usually your supplier or their bank |
| Typical duration | 30 to 120 days | Rolling with your ledger | Per shipment or facility |
| Works for a startup | Sometimes, if the customer is strong | Harder without a trading ledger | Harder without trading history |
| Best for | An order you cannot afford to fulfil | Waiting on customer payment terms | International buying and selling |
Indicative. The three often run in sequence on the same contract: purchase order finance to make the goods, then invoice finance to bridge the payment terms.
Is purchase order finance right for your business?
The order and the customer behind it carry more weight here than your own balance sheet.
-
You are a limited company
FundingLinks arranges purchase order finance for UK limited companies, LLPs and PLCs.
-
You meet the lender thresholds
Minimum turnover requirements commonly start around £100,000, though they vary widely and some lenders apply none. Most want at least 12 months of trading, with exceptions where the end customer is particularly strong.
-
You hold a confirmed purchase order
A firm written order from a business customer. Quotes, forecasts and verbal commitments are not enough to fund against.
-
Your customer is creditworthy
This is the decisive factor. Orders from large retailers, established corporates and public bodies attract the best terms, because the lender is ultimately relying on that customer paying.
-
The order has a clear margin
The finance cost has to sit comfortably inside your gross margin. Thin-margin orders often do not work on this product.
-
You can fulfil the order
Lenders want evidence you can actually deliver, usually a track record of similar work. Funding does not fix an operational gap.
Pros and cons of purchase order finance
It unlocks orders you could not otherwise take. It is also among the more expensive ways to fund one.
Pros
- Lets you accept orders that are larger than your cash position
- Assessed largely on your customer's credit strength rather than your own
- Sometimes available to younger businesses that would fail a standard loan test
- Tied to a specific confirmed order, so it does not become open-ended debt
- Can roll straight into invoice finance once the goods are delivered
Cons
- More expensive than most conventional business borrowing
- Only works where the gross margin can absorb the fee
- Funds go to your supplier, not into your account
- Needs a confirmed order, so it cannot fund speculative stock
- Your customer may be contacted as part of the lender's checks
How much does purchase order finance cost?
Pricing is usually charged per transaction cycle rather than as an annual rate, which makes it easy to underestimate. The only figure that matters is what it costs against the margin on that specific order.
Fee per cycle
2% to 5%
Charged on the funded amount for the length of the cycle, not as an annual percentage. A longer cycle costs more, so the delivery and payment timetable directly affects the price.
Typical cycle
30 to 120 days
From the supplier being paid to your customer settling the invoice. Slippage in delivery or in your customer's payment extends the cycle and the cost with it.
How much gets advanced: Typically 70% to 100% of your supplier cost, depending on the lender, the strength of your end customer and whether goods are being imported. Where less than 100% is funded, you cover the balance.
Check it against your gross margin, not your turnover. This is the test that decides whether an order is worth funding. If the finance cost eats most of the margin, the contract is not worth taking on this product, and we will say so.
Watch the cycle length. Because pricing is per cycle, a customer on long payment terms can quietly double the cost of the same facility. Build their actual payment behaviour into the sums, not their stated terms.
Exact pricing depends on the order size, your customer's credit strength, the supplier arrangement and how long the funds are outstanding. We confirm the all-in cost against your margin before you commit to anything.
Indicative only. The ranges above are drawn from a review of UK market data in August 2026. They are not a quote and no lender is bound by them.
How FundingLinks arranges purchase order finance
A specialist product with a small pool of genuine lenders. Knowing which ones is most of the job.
- 01
Send us the order
Share the purchase order, who placed it, and what your supplier needs paying.
- 02
We approach the right lenders
Purchase order finance is a specialist corner of the market. We go to the lenders on our panel who genuinely write this business, rather than sending it everywhere.
- 03
Compare what is actually offered
We set out the advance, the fee structure and the repayment mechanics side by side, so you can check the cost against your margin on the order.
- 04
Fulfil the order
Your supplier is paid, the goods move, and we can line up invoice finance for the payment-terms gap if that helps.
Why businesses choose FundingLinks
Specialist support for UK SMEs funding orders they have already won.
- 100+
- UK lenders compared
- 500+
- SMEs funded
- 35+ years
- Combined commercial finance experience
Whole-of-market panel
100+ UK lenders, including high-street banks, challenger banks, specialist lenders and alternative finance providers. We are an independent broker, not tied to any single lender.
Specialist, founder-led support
Founded by Sam Wells and Chris Findlow, with 35+ years' combined experience in commercial finance. You speak to specialists, not a call centre.
Clear process, secure portal
Track your enquiry, review lender offers and exchange documents in one secure portal. No email chains, no spreadsheets, full visibility from enquiry to drawdown.
Free to compare, success-based fees
No upfront charge to use FundingLinks. Fees apply only if you proceed with a facility, and they are agreed in writing before you commit.
Purchase order finance FAQs
Direct answers to what business owners ask before funding an order.
What is purchase order finance?
Purchase order finance funds the cost of fulfilling a confirmed customer order before you have been paid for it. The lender pays your supplier so the goods can be produced or bought, you deliver to your customer and raise the invoice, and the lender is repaid when that invoice settles. It is also called PO finance, purchase order financing or PO funding.
How is purchase order finance different from invoice finance?
Timing is the difference. Purchase order finance works before delivery, funding your supplier so you can fulfil the order. Invoice finance works after delivery, releasing cash against an invoice you have already raised. Many businesses use both on the same contract, purchase order finance to make the goods and invoice finance to bridge the customer payment terms.
Can a startup get purchase order finance?
Sometimes, and this is the product's real distinction. Because the lender is relying mainly on your end customer paying, a young company holding a firm order from a large, creditworthy business can occasionally access purchase order finance when it would fail a conventional loan assessment. You still need to demonstrate you can deliver the order. Funding does not solve an operational gap.
What is a confirmed purchase order?
A confirmed purchase order is a firm written instruction from your customer to supply specified goods or services at an agreed price. It commits them to buy. A quotation, a forecast, a framework agreement with no drawn-down order, or a verbal assurance are none of them fundable, because there is no enforceable obligation for the lender to rely on.
Is purchase order finance a loan?
It is usually structured as short-term transactional funding tied to one order rather than a term loan. It has a defined start and end, it self-liquidates when your customer pays, and it does not sit on your balance sheet as ongoing debt in the way a term loan does. Exact treatment depends on the facility, so confirm it with your accountant.
How much of the order will a lender fund?
It varies by lender and by deal, and is usually expressed either as a percentage of the purchase order value or as a proportion of the supplier cost. The stronger your end customer and the clearer your fulfilment track record, the more you are likely to be offered. We set out what each lender on the panel will actually advance before you commit.
Does my customer find out?
Usually yes. Lenders commonly verify the order directly with your customer, and in some structures payment is directed to the lender. This is normal in business-to-business supply and is rarely an issue with larger customers, who see these arrangements often. If confidentiality matters to you, say so early and we will factor it into which lenders we approach.
Can I use purchase order finance for services?
It is harder. The product is built around goods, where there is an identifiable item a supplier produces and a delivery that can be verified. Service contracts with no physical deliverable are usually better served by invoice finance once billing starts, or by a revolving credit facility for the working capital in between.
What happens if my customer does not pay?
You remain responsible for the facility. Purchase order finance is not credit insurance, and the lender will look to you if the invoice is not settled. This is why the credit quality of your customer is assessed so heavily up front. If non-payment risk is your main concern, ask us about bad debt protection alongside an invoice finance facility.
Which businesses can FundingLinks arrange purchase order finance for?
UK limited companies, LLPs and PLCs. It suits wholesalers, distributors, manufacturers and importers holding firm orders from creditworthy business customers.
Is purchase order finance regulated?
Commercial purchase order finance provided to limited companies for business purposes is typically unregulated. FundingLinks works only on unregulated commercial finance for UK businesses.
Can I use purchase order finance and invoice finance together?
Yes, and it is a common structure. Purchase order finance covers the supplier cost so you can fulfil, then invoice finance releases cash against the invoice once the goods are delivered. The two need to be arranged so the lenders are comfortable with each other's position, which is exactly the sort of sequencing we handle.
Related products
Other funding that works alongside, or instead of, purchase order finance.
Common questions
- What is purchase order finance?Purchase order finance funds the cost of fulfilling a confirmed customer order before you have been paid for it. The lender pays your supplier so the goods can be made or bought, you deliver and invoice, and the lender is repaid when that invoice settles.
- What is the difference between purchase order finance and invoice finance?Timing. Purchase order finance works before delivery, paying your supplier so you can fulfil a confirmed order. Invoice finance works after delivery, releasing cash against an invoice you have already raised. Many businesses use both on the same contract.
- What is supply chain finance?Supply chain finance, sometimes called reverse factoring, lets you pay suppliers early while you keep longer payment terms. A funder settles your supplier promptly, often at your stronger credit rate, and you repay the funder later. It strengthens your supply chain without draining your own cash.
- Can a startup or new company get business finance?It is harder, but not impossible. Many lenders want a trading history, so the newest businesses have fewer options and pay more. Invoice finance can work earlier than most products, because it looks at the strength of your customers rather than your own track record. We will give you a straight read on what is realistic at your stage.
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Written by
Chris Findlow
Director, FundingLinks
Chris Findlow co-founded FundingLinks after more than 15 years across commercial lending, invoice finance and fintech partnerships, including senior leadership roles at Kriya. He brings deep lender-side experience across sales, partnerships and account management to help SMEs access the right funding.
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