Production Purchase Order Financing (Aka Work in Process Finance)

Production Purchase Order Financing (Aka Work in Process Finance)

Production purchase order financing is a financing tool used by domestic manufacturers or assemblers.

It’s used to procure the necessary components and/or raw materials to “make” or “build” a finished product either in their own facility or using sub-contractors.

This differs from traditional Purchase Order Financing:

The borrower is outsourcing manufacturing of the product. Some form of credit enhancement such as LCs or cash funding is required to pay the contract manufacturer for the finished product.

PO financing importantly doesn’t require a company to give up equity. It matches short-term funding with a short-term need.

Leigh Dunsford, Stak

Production financing rapidly employs 100% of the transaction capital to get goods made and is a cash-flow creation tool for companies that make, buy and sell products.

Businesses avoid bringing in a new equity partner to solve short term cash-flow problems or pairing long term debt to short term needs, resulting in paying for capital well after the need.

Purchase Order Finance
$5M
  • Max Facility sizes
  • Pay third-party factories
    100% of goods + freight/duties
    Up to 180-days per drawdown
    No lock-in period
    Any country
Production Finance
$10M
  • Max Facility sizes
  • Local assembly or manufacturing
    WIP and production costs
    Up to 180-days per drawdown
    No lock-in period
    Australia & Singapore

If a business is owned or partly owned by a private equity group, it does not have to put more of its own capital into a deal and can leverage off the PO funders balance sheet.

This is especially important if funds are being sought to match sales rather than capital expenditures.

Seeking financing of purchase orders at a 100% advance rate of the cost of the required inventory (including freight/duties/logistics) is ideal. Finding the alternative to an equity partner and one that can coexist with senior lenders and factoring providers is your best case scenario.

Need help fulfilling larger sales orders? Ask Stak.

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We regularly share our thoughts on trade finance, lending, company culture, product strategy, and design.

Stak provides working capital to clients that sell to some of the largest buyers in Australia & overseas.

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