How does purchase order finance differ from invoice finance?

Purchase order finance funds you BEFORE you deliver goods - it pays your suppliers so you can fulfil a confirmed order. Invoice finance funds you AFTER you deliver and invoice. PO finance covers the production/sourcing stage; invoice finance covers the payment waiting stage. Many businesses use both together to fund the entire order-to-cash cycle.

How much does purchase order finance cost?

Typical costs are 1-3% per month of the funded amount, which works out at 12-36% annualised. This is significantly more expensive than invoice finance (which costs 1-5% annualised) because the risk is higher - the goods haven't been delivered yet. Costs reduce for repeat orders with proven delivery track records.

Can I use purchase order finance and invoice finance together?

Yes, and this is the most common arrangement. PO finance pays your supplier to produce or source the goods. Once you deliver and invoice your customer, invoice finance takes over and advances against the invoice. The PO finance is repaid from the invoice finance advance, creating a seamless funding cycle.

What do I need to qualify for purchase order finance?

You need a confirmed purchase order from a creditworthy customer (the provider assesses your customer, not you), a reliable supplier, and a proven ability to deliver. Most providers require at least 6-12 months trading history and orders above £25,000. Margins of at least 20% are typically required to cover the funding cost.

Purchase Order Finance UK 2026

Purchase order finance pays your suppliers so you can fulfil large orders before you invoice. The provider funds up to 100% of supplier costs against a confirmed purchase order from your customer. Typical costs are 1-3% per month. It is used by manufacturers, importers, and wholesalers who win orders larger than their working capital can support. Many businesses use PO finance alongside invoice finance to fund the entire order-to-cash cycle.

Quick Reference

Direct Answer

Purchase order finance funds up to 100% of supplier costs so businesses can fulfil large orders before delivery. Costs 1-3% per month. Differs from invoice finance because it funds pre-delivery (production/sourcing) not post-delivery (payment waiting). Used by manufacturers, importers, and wholesalers.

Summary

PO finance bridges the gap between winning an order and delivering it. The provider pays your suppliers directly, you fulfil the order, then invoice finance takes over post-delivery. Typical costs are 1-3% per month (12-36% annualised). Qualification depends on the customer's creditworthiness, supplier reliability, and minimum 20% margins. Orders typically need to be £25k+ with 6-12 months trading history.

This Page Covers

How PO finance works, costs, qualification criteria, how it combines with invoice finance, key providers, comparison with invoice finance

Not Covered Here

Invoice finance details (see /guides/), asset finance, trade finance letters of credit

How Purchase Order Finance Works

The process follows a straightforward sequence. You win a confirmed order from a creditworthy customer but lack the cash to buy materials or pay your supplier. Here is what happens:

1.You receive a confirmed purchase order from your customer.
2.You submit the PO and supplier quote to the finance provider.
3.The provider assesses your customer's creditworthiness and the order viability.
4.If approved, the provider pays your supplier directly (up to 100% of supplier costs).
5.Your supplier manufactures or ships the goods.
6.You deliver to your customer and raise an invoice.
7.The PO finance is repaid when your customer pays (or from an invoice finance advance).

PO Finance vs Invoice Finance

Factor	Purchase Order Finance	Invoice Finance
When it funds	Before delivery	After delivery
What it funds	Supplier/production costs	Outstanding invoices
Typical cost	1-3% per month	1-5% annualised
Advance rate	Up to 100% of supplier cost	75-95% of invoice value
Risk assessed	Your customer + supplier reliability	Your customer's ability to pay
Best for	Manufacturers, importers, wholesalers	Service businesses, contractors, all sectors

Typical Costs

Purchase order finance is more expensive than invoice finance because the provider takes on more risk - the goods have not been delivered yet, so there is production risk, shipping risk, and quality risk on top of the customer's credit risk. Expect to pay:

Monthly charge: 1-3% of the funded amount per month
Annualised cost: 12-36% depending on order size, customer quality, and your track record
Setup fee: £0-£1,500 per facility (some providers charge per order)
Minimum order: typically £25,000-£50,000

The cost is high in percentage terms, but the alternative is turning down the order entirely. If your margin on the order is 30% and the PO finance costs 3% per month for a 2-month cycle, you are paying 6% to earn 30% - still a profitable transaction. The key is ensuring your margins are sufficient to absorb the funding cost.

Who Uses Purchase Order Finance

PO finance is most commonly used by businesses that source or manufacture goods before selling them. The typical users are:

Manufacturers - need to buy raw materials and pay labour before delivering finished goods. A manufacturer winning a £500k contract needs working capital to buy materials months before payment arrives.
Importers and distributors - must pay overseas suppliers (often upfront or on short terms) while offering UK customers 30-60 day payment terms. The cash gap can be 90+ days.
Wholesalers - buy in bulk from suppliers and sell to retailers on credit terms. Large seasonal orders (Christmas stock, for example) can require funding far beyond normal cash reserves.
Growing businesses - companies experiencing rapid growth often win orders that exceed their existing working capital. PO finance prevents growth from becoming a cash flow crisis.

Using PO Finance and Invoice Finance Together

The most powerful arrangement combines both products to fund the entire order-to-cash cycle. This is how it works in practice:

You win a £200,000 order. Your supplier cost is £140,000. The PO finance provider pays your supplier £140,000. You manufacture or assemble the goods and deliver them. You raise a £200,000 invoice. Your invoice finance provider advances 85% (£170,000). From that £170,000, the PO finance is repaid (£140,000 plus fees). You receive the balance. When your customer pays, the invoice finance provider releases the remaining 15%.

Several providers offer both products as an integrated package, which simplifies the process. Close Brothers, Bibby, and specialist trade finance providers can structure combined facilities where the PO finance automatically rolls into invoice finance upon delivery.

Key Providers

Purchase order finance is offered by specialist trade finance providers and some of the larger invoice finance houses. The main providers in the UK include:

Close Brothers - offers integrated PO and invoice finance facilities. Strong on manufacturing and import businesses.
Bibby Financial Services - provides trade finance including PO funding alongside their invoice finance products. Good for businesses needing both.
Sonovate - specialises in contract and PO finance for recruitment and professional services.
Tradebridge - specialist PO and trade finance provider for importers and distributors.
Woodsford TradeBridge - focused on international trade finance with PO funding capabilities.

"The biggest growth constraint for product businesses isn't sales - it's working capital. Purchase order finance removes the ceiling on how large an order you can accept." , UK trade finance overview, 2026

Oliver Mackman

Director, Market Invoice

Oliver leads Market Invoice's editorial and comparison research. With a background in UK commercial finance, he oversees provider analysis, rate verification, and industry reporting across all verticals.

Last reviewed: 13 April 2026