Invoice Factoring vs. Purchase Order Financing
They solve different problems. Factoring turns a completed invoice into cash. PO financing pays your suppliers so you can produce the order in the first place.
The quick answer
Use PO financing when you've won a big order but can't afford to buy the materials. Use factoring after you've shipped and invoiced. Many deals use both back-to-back.
Side by side
| Invoice Factoring | Purchase Order Financing | |
|---|---|---|
| When it funds | After you invoice | Before you produce |
| Uses | Any operating expense | Supplier payments only |
| Cost | 1.5%–3.5% per invoice | 3%–6% per transaction |
| Approval basis | Customer credit | Customer credit + supplier + margin |
| Margin required | Any margin | Typically 20%+ gross margin |
| Best for | Ongoing AR turnover | One-off large orders |
When Invoice Factoring is the right call
- You've already delivered and invoiced
- Your customers pay slowly
- You need working capital across all orders
When Purchase Order Financing is the right call
- You've won an order too big to self-fund materials
- Gross margin is at least 20%
- The end buyer is investment-grade or strong credit
- You have a supplier ready to fulfill
Bottom line
Most PO-financed deals roll straight into factoring the moment you ship. We structure them together so nothing falls through the cracks.
Frequently Asked Questions
Other comparisons
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