Factoring and Purchase Order Financing

Factoring converts unpaid invoices into immediate cash. The factor advances a large percentage of the invoice face value, collects from the customer on the original terms, and remits the reserve balance less its fee once payment arrives. Purchase order financing addresses the earlier problem: a confirmed order the business cannot fill because it lacks the cash to pay suppliers. The lender pays the supplier directly, the goods ship, the invoice is generated, and the facility is repaid from the customer's payment, often rolling into a factoring line.

The critical distinction from every other product in this network is whose credit is being underwritten. A factor is buying receivables owed by your customers, so their creditworthiness and payment history drive the decision far more than your balance sheet, time in business or credit score. That makes factoring uniquely available to young, fast-growing or thinly capitalized companies with strong commercial or government customers. The structure grows automatically with sales, which is exactly what a scaling business needs, and it is meaningfully cheaper than a merchant cash advance. What it requires is discipline around notification, collection practices and concentration.