Most PO funders prefer finished good deals where they can pay the suppliers and control the delivery of the goods to make sure the terms of the purchase order are met. The funder will usually insist that a factoring relationship is in place to pay them once a valid invoice is created and to make sure the credit of the customer ordering the goods is solid. This helps them complete their part of the transaction quicker and reduces their risk. Since a purchase order funder takes on a great deal of risk they will charge at least 5% of the purchase order amount. Again it is very important that there is a good enough margin on each transaction to cover the costs of the purchase order funding fees and the factoring fees.

Purchase Order Funding Example:

     Judy'sUniforms,Inc. gets a purchase order from a prison system to sell them uniforms. Since she is in the process of expanding her business she does not have enough money to buy the uniforms so se can sell them to the prison. She doesn't want to miss this opportunity because she can mark up the uniforms 50% and can get a lot more orders when she fills this one.