Purchase order factoring (a.k.a. contract funding) is short term funding used by a borrower to finance the fulfillment of a sales contract with a credit worthy end-customer. The terms of the purchase order financing agreement are very specific, requiring the borrower to use loan funds for the purchase of certain materials and/or services needed to deliver goods to the end-customer. Purchase order factoring is what many turn to during times of growth and expansion. It is at these time when cash flow reserves become insufficient and your suppliers want you to pay cash on delivery while your buyers want to pay you on net 30 - 60 day terms. This can mean no incoming cash during manufacturing when goods are in transit, and invoices have not yet matured.

With purchase order factoring pays your supplier for the cost of your goods and frees up your cash for other expenses.

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