Which funding products does this apply to?

Working Capital, Invoice Financing. Each has its own page listing the funders in this directory that offer it and what each one publishes about its terms.

Is this specific to retail?

It is written around how a retail business actually generates and collects cash, which is what makes its funding problem different. The mechanics transfer; the arithmetic may not.

The Find Me Funders research desk. Some drafting is AI-assisted, and every page that is says so at the top, including whether a person has checked its claims yet.

How do I know a figure here is right?

Where a page carries the green notice, its claims were checked against the sources listed at the end and a reviewer is named. Where it carries the amber one, nobody has verified it yet and you should confirm anything you plan to act on.

Are the examples real deals?

No. Every worked example is labelled illustrative and exists to show the arithmetic. What any particular lender charges is on that lender's page, where it publishes it.

Why do you never say what a typical rate is?

Because we cannot source it. A market average assembled from lenders who do not publish prices is a guess with a decimal point on it. Where a lender publishes a figure, we show that figure and say where it came from.

Is this financial or legal advice?

No. It is general information about how these products work. Outcomes depend on your contract and your state, and a lawyer or accountant licensed where you are is the person to ask about your situation.

Can I reuse this content?

Quote a paragraph with a link back. Do not republish whole articles.

Factoring or purchase order finance for the same order

One funds the goods before they exist. The other funds the invoice after they ship. If you pick the wrong one you either cannot fill the order or you pay twice to fill it.

By Find Me Funders research desk Updated 14 September 2026 964 words 4 min read

Drafted with AI assistance. Not yet independently checked. Nobody has verified the claims on this page against a source, so treat the figures and legal points as a starting point rather than as settled, and confirm anything you are about to act on. How we check things.

These two products do not compete. They sit at different points on the same order, and the point you are stuck at decides which one you need. Purchase order finance pays your supplier before the goods exist, against a confirmed order from a creditworthy buyer. Invoice factoring buys the invoice after you have delivered. One funds cost of goods; the other funds the gap between delivery and payment.

That timing difference sets the cost. PO finance is priced on the supplier cost for as long as the goods are in transit and in your buyer's receiving dock — typically two fee periods, sometimes three. Factoring is priced on the invoice face value for the days it is outstanding. If you use both on one order, and most PO deals are taken out by a factoring facility, you pay both.

Where purchase order finance wins

Illustrative only —a $400,000 order from a buyer who pays in 45 days. Your cost of goods is $260,000, so the gross margin is $140,000, or 35%. You have $30,000 in the bank. Your supplier wants payment before production.

Factoring cannot help. There is no invoice, because there are no goods. The honest comparison is not PO finance against factoring. It is PO finance against turning the order down.

PO finance pays the supplier $260,000. At 3% per 30-day period across two periods, the fee is $15,600.
On delivery you invoice $400,000. A factoring facility takes the invoice at a 2.5% discount, $10,000, and repays the PO funder out of the proceeds.
You net $114,400 of the $140,000 margin — 82% of it.

Against a margin of zero for an order you could not fill, $25,600 of combined fees is not a close call.

Where factoring alone wins

Illustrative only —same order, same buyer, same $400,000. But this time your supplier gives you 60 days, or you have the cash to buy the goods.

Now PO finance funds nothing you needed. Take the factoring facility alone and your cost is the $10,000 discount. Your net margin is $130,000 instead of $114,400. Layering PO finance on top costs $15,600 for money you did not need — and PO funders are often the party that introduces the factoring facility, so this happens more often than it should.

The variable that flips it: whether you can pay the supplier without help.Not whether you can afford to. Whether the cash exists on the day the supplier wants it. That is the whole question, and it is a calendar question, not a profitability question.

Margin is the second gate

PO finance is priced against cost of goods, which means the thinner your margin, the larger the fee relative to what you keep. Run the same $400,000 order at different margins, with a 3% monthly PO fee across two periods and a 2.5% factoring discount:

35% margin: $140,000 gross, $15,600 PO, $10,000 factoring, $114,400 left — 82% of margin.
22% margin: $88,000 gross, $18,720 PO, $10,000 factoring, $59,280 left — 67%.
15% margin: $60,000 gross, $20,400 PO, $10,000 factoring, $29,600 left — 49%.
12% margin: $48,000 gross, $21,120 PO, $10,000 factoring, $16,880 left — 35%.

Below roughly 20% gross margin, the financing takes a third or more of what the order was worth, before you have paid a single hour of your own overhead. That does not make it wrong — half of something beats all of nothing — but it does mean a thin-margin order financed this way has to be a bridge to something, not a business model.

The prices are not on the same measure

A PO fee is quoted per 30-day period on the supplier cost. A factoring discount is quoted on the invoice face value. They have different bases and different clocks. Converting one to the other requires the number of days the goods are in transit and the days the invoice is outstanding, and neither is known when you sign.

Do not let anyone hand you a blended rate. Ask instead for the total dollars of fee under three scenarios: your buyer pays on time, your buyer pays 30 days late, and your buyer pays 60 days late. The third one is where PO finance gets uncomfortable, because the fee keeps running while the factoring discount steps up.

The questions that settle it

Do I have a confirmed purchase order from a buyer a funder will underwrite? PO finance underwrites your customer, not you. No firm order, no deal.
Can I pay the supplier on the day the supplier requires it? If yes, you need factoring at most.
What is the gross margin on this specific order? Run the fee arithmetic on that number, not on your company average.
Who takes out the PO funder, and on what terms? If the answer is "our factoring partner", ask for that facility's pricing in the same document. A PO quote without the exit priced is half a quote.

What to have ready, and what to refuse

Have the signed purchase order, your supplier's proforma invoice, your buyer's payment history and a delivery timeline with dates. PO funders move on the buyer's credit and the supplier's reliability, so the two documents that matter most are not yours.

Refuse a PO facility that will not name the number of fee periods and what triggers a new one. Refuse a structure where the PO funder pays your supplier directly and controls the invoice proceeds without telling you, in writing, how any surplus gets released and when. And if a funder offers PO finance when you told them you can pay the supplier yourself, ask why — then take that answer as information about the funder.