How Long Does It Take to Get Funded Through Purchase Order Financing?

Imagine landing your business’s biggest order ever, but you don’t have enough cash on hand to pay your supplier and, in turn, actually fulfill that order. For many growing businesses, this is a common scenario, and it can limit their ability to expand and take advantage of growth opportunities.

Rather than turning to credit cards or lines of credit, one solution to consider is purchase order financing, also known as a purchase order business loan. Throughout this article, we use the term “purchase order business loan” for simplicity and because it’s commonly used. However, this financing is more accurately called purchase order financing.

Unlike a traditional loan, the funds are typically paid directly to your supplier to fulfill the order, and repayment depends on your customer paying their invoice. There is no fixed repayment schedule like conventional loans, so it functions more like a transaction-based advance than a standard loan. This financing option helps businesses cover supplier costs upfront, so they can fulfill large customer orders without draining their working capital.

Also understanding how long it takes to go from application to purchase order finance funding can help you plan production schedules, manage customer expectations, and avoid delays. Here’s a look at each stage of the PO financing process, average timelines, and tips to speed things up so you can get back to business.

What Is Purchase Order Financing?

Purchase order financing helps businesses quickly borrow funds from a lender to pay suppliers for goods that will be delivered to customers. Once the goods are delivered and the customer pays their invoice, the lender deducts their fees and releases the remaining funds to the business.

A purchase order business loan uses the customer’s order as collateral to secure the debt. Depending on the lender and even the creditworthiness of the customer who placed the order, your business may be able to borrow up to 100% of the purchase order value.

Who Uses PO Financing?

Any business that receives a purchase order outside of their usual scope or production volume can benefit from purchase order business financing. This often applies to wholesalers and distributors, but can also include import/export companies, seasonal businesses with cash-flow gaps, or even a small business that goes viral and unexpectedly needs to fund quick growth.

Unlike a traditional loan, this type of financing is more like a cash advance for a specific transaction (your customer’s purchase order). That means approval largely depends on your customer’s creditworthiness, not just yours. If your customer is a known commercial or government client with a proven track record of payment, you’re more likely to get approved.

If you find yourself needing funding of purchase orders to take on and fulfill larger contracts, this can be a game-changer.

The Purchase Order Financing Timeline: Step-by-Step

The business funding process for purchase order financing is pretty straightforward, but each stage has its own purpose and timeline. Here’s a detailed look at the five primary steps, from application to supplier payment and final settlement.

Step 1: Initial Application

The first stage of PO financing begins when you apply to a lender. This is where you submit your purchase order details, supplier invoices, and financial documents for review, and includes the first day or two of the process.

The lender’s goal at this point is to verify that your transaction is legitimate and that your customer — the company that actually placed the order — is also creditworthy. Most lenders focus heavily on the buyer’s reliability because that’s who will ultimately pay back the purchase order business loan when they pay their invoice. If your buyer has strong credit and a history of timely payments, your chances of approval increase significantly.

During this stage, the lender will also confirm the details of your supplier arrangement and check whether your business has the capacity and ability to fulfill the finished goods order as promised.

If you’re missing any paperwork, like incomplete purchase orders or supplier quotes, you may experience delays. To avoid that, make sure your application is complete and accurate before applying for PO financing.

Step 2: Underwriting and Due Diligence

Once the initial application is provisionally accepted, lenders move into an underwriting and due diligence phase, where the goal is risk assessment. The lender will confirm the authenticity of your large order, run background checks on your buyer and supplier, and assess your overall business stability before the application process moves on.

Additional info may be required depending on your business history and credit score. If you’re a startup with a limited business history, for example, you may need to provide financial statements or a personal guarantee for your purchase order business loan.

If your supplier is located overseas, your purchase order financing company may also verify compliance with trade regulations and shipping timelines. This is especially common for import/export businesses, where logistical complexity can affect both cost and timing.

The underwriting process usually takes another two to three business days, but can take even longer if there are hiccups, like unresponsive suppliers or a buyer with a bad credit history. To keep the eligibility process moving, make sure that your buyer and supplier know that the PO financing company will be contacting them for confirmation.

Step 3: Approval and Agreement

If the lender completes underwriting and is satisfied with the purchase order funding verification process, you’ll receive formal approval. Part of the approval process involves outlining the purchase order financing terms, like your PO financing rates, repayment structure, and any fees involved.

As with any small business financing, you should review the PO funding agreement carefully before signing. Also make sure you understand all of the costs associated with your purchase order financing, and ask questions if you don’t understand anything.

Interest rates on purchase order business loans are often higher than other forms of business financing, such as traditional loans or business lines of credit. That’s because the lender takes on a lot of risk by securing the debt with what is essentially an unfulfilled order. That said, this is designed to be a short-term debt, making speed and flexibility more important for many small business owners than purchase order financing costs.

Most businesses can review and sign the agreement in a day or two, which means this step usually wraps up quickly unless there are negotiations over the terms. Once the paperwork is signed, the lender is ready to move forward with supplier payments.

Step 4: Supplier Payment and Order Fulfillment

Once a borrower signs their agreement, the financial institution will issue a letter of credit and disburse funds directly to the supplier. This allows your supplier to start production or release the goods you’ll need to produce your client’s order on time. For businesses, this is the most critical stage because it unlocks the ability to move forward without tapping into internal cash reserves.

The timing here depends on a few variables: how quickly the lender can process the transfer, the supplier’s location, and how the payment is being made. With domestic suppliers this could take one to five business days, while international transactions involving wire transfers and currency conversions can take up to a week or more.

During this phase, keep clear communication with your supplier to ensure that you’re on track. Your lender may also want regular updates to confirm that the order is progressing as planned.

Step 5: Delivery and Invoice Settlement

The final stage of purchase order business financing starts when your customer receives the goods they ordered.

Once delivery is confirmed, your customer pays their invoice directly to your lender. The lender then deducts its fees and releases the remaining balance to your business (which is your profit margin), and the purchase order business loan is completed.

The timeline for this stage varies widely because it depends on your customer’s agreed payment terms. If your buyer operates on net-30 or net-60 accounts receivable terms, you could wait a month or two before your funds arrive. The faster your buyer pays, the faster you’ll see your share of the cash.

Some lenders also offer invoice factoring or invoice financing to accelerate payment at this point, but that usually comes at yet another additional cost.

You may also like: Business Loan Application Checklist What Lenders Really Look For

Final Thoughts

Although often referred to as a “loan,” purchase order financing differs significantly from traditional loans. It is tied specifically to customer purchase orders and supplier payments, rather than typical borrower-driven loan repayments.

Most businesses can get their suppliers paid quickly, then begin fulfilling their customer order. The better prepared you are before applying, the better the application, approval, and funding process will go. With the right planning, you’ll always be ready to deliver big orders and grow confidently.

Note: In this article, we use the term “purchase order business loan” for simplicity, though the correct term is purchase order financing. Unlike a traditional loan, funds are usually paid directly to your supplier to fulfill the order, and repayment depends on your customer settling their invoice. Since there’s no fixed repayment schedule, it works more like a transaction-based advance than a standard loan.

FAQs on Purchase Order Business Loans

How does purchase order financing work?

With PO financing, a lender uses your customer’s purchase order as collateral to fund production or procurement. The lender pays the supplier, you fulfill the order, and your customer pays the lender. After deducting fees and PO financing rates, the lender sends you the remaining balance, which is your profit from the order.

Who qualifies for purchase order business loans?

Businesses that receive large or unexpected purchase orders, but lack the upfront capital to fulfill them, often qualify for PO financing. Approval depends more on your customer’s creditworthiness than your own, though, making it a good option for wholesalers, distributors, import/export businesses, and even seasonal companies or startups.

How long does it take to get PO financing?

The timeline for a purchase order business loan may range from seven to 14 days (but can vary greatly), which includes the application, approval, and sending a payment to the supplier. The full cycle, including customer repayment and getting the business cut of the profits, can take longer depending on your customer’s agreed payment terms.

What documents are required for a purchase order business loan?

Lenders will usually want a copy of the purchase order from your customer as well as a quote or invoice from your supplier. For purchase order business loan eligibility, expect to send basic financial information about your business and its history, bank statements or records, and any trade references. In some cases, a personal guarantee may even be required.

How much can I borrow with purchase order financing?

You may be able to borrow up to 100% of the purchase order value, with some lenders offering as much as $25 million. Some lenders will fund less and require your business to cover a percentage of the order cost. As with other financing solutions, how much you can borrow depends on the lender you choose and the creditworthiness of your customer.

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