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One of the more difficult areas in which to secure business capital, the financing of large Purchase Order Financings is a specialty at Sovereign Funding Group. Our financing partners include the largest providers of Purchase Order Financing in the country.
Businesses require Purchase Order Financing for two main reasons:
1) The company has received a large order from a credit worthy customer & is undercapitalized so it can not fulfill it in time or at all
2) And/or their cost of goods exceeds their current line of credit.
For some clients, cash can be advanced on a Purchase Order Financing, allowing the business to fulfill the order and deliver the product.
Sovereign Funding Group has made available a unique product for brokers, resellers, importers and exporters that in the past may have had difficulty obtaining purchase order financing or if they have found purchase order financing , it was cost prohibitive. We are transaction driven, which means we will fund startups and businesses less than 2 years old. We look at the credit worthiness of your customer and the ability of your vendor to deliver the goods. We also will work with your current factor or asset based lender.
In layman’s terms, we have made it easier to get purchase order financing for your business. You can take on the bigger deals and increase your profits using Sovereign Funding Group! We know time is of the essence in these type transactions. We will quickly size up your deal and get you funded.
The purchase order financing funder pays the Client’s Vendor directly, usually through a Letter of Credit.
Purchase order financing is used to pay your suppliers, laborers, or other intermediaries for goods or services to generate additional sales. A company will need Purchase Order Financing financing when:
- You need expertise to handle the financing
- You need additional working capital
- You need a quick response to an immediate sales need
- You don’t want to incur additional credit risk, be it foreign or domestic
- You want your buyers and sellers to not know each other
- You want the opportunity to make additional profit
We understand all the above reasons and will work with you to fulfill your needs.
Sovereign Funding Group will fund purchase order financing for all types of transactions that include:
- U.S. Supplier to U.S. Buyer
- U.S. Supplier to Foreign Buyer
- Foreign Supplier to U.S. Buyer
- Foreign Supplier to Foreign Buyer
- Unique Transactions
Every purchase order financing transaction stands on its own. We look at your business history, the credit worthiness of the buyer, the ability of your supplier to produce the goods, and if the transaction is profitable for all parties.
Here are examples of purchase Order Financing deals:
1) Your company brokers computer hardware. You have put together a deal to sell 250 laptops for $300,000. Your cost is $260,000 and the source wants a $200,000 down payment. Sovereign Funding Group makes the down payment, collects the $300,000 from your client and gives you the balance less our 6% fee.
2) You have secured a government contract supplying telephones for $50,000. The supplier needs paid in advance $42,000. We pay the supplier and collect the money from the government, remitting you your profit less our 7% fee.
3) You have secured a purchase order financing to supply denim shorts from India to a major department store. The supplier needs a letter of credit for $140,000. We put up the L.C. and collect the money from your current factor when the invoice is funded.
4) Your business can buy 1000 15″ monitors at $30 a piece. You find a buyer at $38 each. We buy the monitors and have them inspected. We have the monitors shipped to you client who in turn pays us (factoring). You then get the profits less our fee and the transaction costs.
Typical PURCHASE ORDER FINANCING Requirements and facts to know:
- The order is for goods that have been pre-sold.
- The Vendor is an established company with a good reputation and preferably has had a prior business relationship with the Client.
- The Client is credit worthy with good trade or personal references.
- The Client’s customer is credit worthy.
- You are not advanced cash against a Purchase Order Financing. We buy finished goods on your behalf so the terms of the PO from your customer can be met.
- PO Funding is usually only applicable to Finished Goods you purchase elsewhere. Work in Progress (WIP) and service/installation Purchase Order Financings are harder to fund but are fundable on a case by case basis.
- The goods are shipped directly from the Client’s Vendor to the Client’s customer. If an exception is allowed, the Funder may allow a minimal of “value added” service at a bonded warehouse or a warehouse that is acceptable to the Funder.
- Some inspection should be in place to assure that the goods shipped by the Vendor are correct and meet the specifications of the Client and the Client’s customer.
- There is an exit strategy in place and/or the goods have a salvage value that can be exercised if the order is canceled or not accepted by the Client’s customer.
Business History
We consider funding those organizations with a track record of producing goods. Your company may be young or a start-up, but your company management must have a proven track record to produce the goods.
Buyers: Purchase Order Financing
Your buying firm must be reputable with a good credit line. The Purchase Order Financing must be verifiable.
Suppliers: Purchase Order Financing
Your suppliers must know your product and be able to produce it in time and to meet your buyer’s terms. The supplier must be a firm with a good business history and track record of producing goods.
Profitability
The transaction after all expenses must make a profit for all parties. Payment of the money lent to support the transaction can come from any number of sources such as factored receivables.
Purchase order financing is available only to qualified customers.
Purchase order financing falls into two types:
1) Finished Goods
2) Non-Finished Goods
Finished goods refers to transactions where the goods are never touched by you. Usually these goods go directly from your supplier to your buyer. You never take direct possession.
Non-finished goods are when you the seller take possession of the goods either in a raw state (such as yarn to make blue jeans) or a semi finished state (partially sewn blue jeans). In either case you must take possession of the product.
Finished goods are easier to finance than non-finished goods. We will need to assess your ability to complete the transaction in processing the goods for the final shipment to your buyer. We finance both finished and non-finished purchase order financing.
In order to consider purchase order financing for your firm we will need:
- Completed purchase order financing application Form
- Your invoice to buyer
- Your supplier’s invoice
- Your Purchase Order Financing to your supplier
- Profit on transaction – gross margins >18%
- Business History
- P&L (most recent)
- Balance Sheet (most recent)
- Time frame to produce goods
- Credit information on your buyer
- Supplier Information
- Finished Goods or Non-Finished Goods.
Generally we charge 2-5% on finished goods (sometimes more, sometimes less) one time fee for purchase order financing on the gross amount to be paid by the buyer. Sometimes there may be an additional interest charge on the money advanced if the purchase order financing takes greater than 30 days to complete. Every purchase order financing pricing is individual and unique. This purchase order financing fee does not include the factoring fee which may cost an additional 3% to 6% if you are factoring the receivable. We will consider financing a Purchase Order Financing transaction to be paid out by another factor or lender. In order to see if the transaction will make money for both parties, please fill out the worksheet section of the application form. As you can see the total cost of Purchase Order Financing financing fee and factoring fee can range from 4 to 11%. Since both of us need to make money, the gross margin should be greater than 18%.
Purchase Order Financing Example #1 (U.S. Supplier to U.S. Buyer)
You are a clothing manufacturer. You have been in business for 4 years and have a good Profit and Loss Statement and Balance Sheet. You just received a large order and are maxed out on credit from your suppliers.
Your sales price to your buyer is $200,000 and your total cost to produce the goods is $130,000. Your gross margin is 35%. We will purchase the goods for you from your supplier, give you 45 days to produce the goods, charge you a 5% purchase order financing fee ($10,000, 5% of $200,000) and factor your receivables.
Example 2 (Foreign Supplier to U.S. Buyer)
You are importing binoculars from Hong Kong. You do not need to touch the goods; they will be shipped directly to the buyer, a large U.S. retailer. The cost of the goods is $600,000 and you will sell them to the buyer for $800,000. Gross margins are 25% (after all importing costs). We open a Letter of Credit to your supplier and will factor the receivables. When the goods are shipped your Hong Kong supplier will get paid. When the goods are landed in the U.S. and shipped to the U.S. buyer, we will factor the receivable and pay the purchase order financing from the funds advanced.
Unique Transactions
Types of Unusual Purchase Order Financing Funding include:
- Capital Equipment Acquisition
- Non-U.S. Cross border Transaction Funding
- Overhead Funding
- Mold and Dye Manufacturing Costs
- Research and Development Costs
- Chapter 11 Bankruptcy Funding
- Inventory
- Closeouts
Unique Transaction Examples
1) Client had a job to refurbish 2 computer processor chip making machines.
The machines, once state-of-the-art, are now 3 years old (totally obsolete for computer manufacturers, but perfect for consumer electronic manufacturers, etc.). They needed $950,000 to buy old machines and for parts and labor to complete them. Funding was provided. The machines, upon satisfactory inspection, sold for $1.5 million.
2) Client had a contract to sell a $260,000 computer to a major company in Sweden.The equipment had to be purchased in Indonesia for $190,000, which was funded. A Letter of Credit was not acceptable, so the transaction was funded through direct wire transfer through the bank’s Hong Kong office to its affiliate in Indonesia.
Sovereign Funding GROUP MAKES the Difference
Sovereign Funding Group takes pride in its ability to do an extensive search through more than 50 funding partners to fit the finance program to meet the specific needs of its clientele. Sovereign Funding Group goes over more than 100 programs to decipher which financing program you need as quickly and cost effectively as possible. We give you 2-3 options from the hundreds out there. Sovereign Funding Group works hard to make sure you don’t have to waste time and money running around. It has eliminated the restrictive terms and high fees common in Business Financing Programs.
Unlike others, Sovereign Funding Group does all the preliminary due diligence and work to make sure the funding sources are credible and can do what they say.
If your tight cash flow is preventing you from accepting new business or even threatening your very existence, get in touch with Sovereign Funding Group today!
Take The Next Step – to see how Purchase Order Financing solution for your business can increase your company’s productivity and profitability. We’ll arrange a convenient time to go over your specific company needs and goals. You’ll soon discover why more and more businesses are choosing Sovereign Funding Group to provide a financial solution to help you grow and prosper.
Feel free to contact us anytime for a free no-risk consultation toll-free at (877) 836-4661 or email us if you have any questions.

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