What is the difference between purchase order finance and invoice finance?

They fund different moments in the same trading cycle, and the confusion between them is common enough to be worth setting out plainly.

The core difference

Purchase order finance funds the order before you deliver it. You have a confirmed order but cannot afford to pay your supplier to fulfil it. The lender pays the supplier directly.

Invoice finance funds the invoice after you deliver it. The work is done, the invoice is raised, and now you are waiting 30, 60 or 90 days for the money. The lender advances most of it straight away.

Side by side

	Purchase order finance	Invoice finance
When	Before delivery	After invoicing
Pays for	Your supplier’s costs	Cash against your invoice
Money goes to	Your supplier	Your business
Credit assessed	Mainly your end customer	You and your customers
Duration	Per order	Rolling with your ledger

They are not either/or

The most useful thing to understand is that these often run in sequence on the same contract.

You win an order. Purchase order finance pays your supplier so the goods get made. You deliver and invoice your customer. Invoice finance then releases cash against that invoice while you wait for payment. One facility hands over to the other.

If you are doing this, tell both lenders about each other early. They will each want to understand their security position, and discovering the other one at the credit stage is the fastest way to lose an offer.

Which do you actually need?

Ask what is stopping you right now. If you cannot pay your supplier, it is purchase order finance. If the goods have gone and you are waiting to be paid, it is invoice finance. If it is both, say so and we will structure the pair together.