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.

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

PO Finance vs Invoice Finance

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%.

Some providers offer both products, which simplifies the process. Bibby Financial Services, for example, lists purchase order and pre-shipment trade finance alongside its invoice finance, and specialist trade finance lenders can structure combined facilities where the PO finance rolls into invoice finance on 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 - an invoice finance and asset-based lending house; ask whether it will fund supplier payments against a confirmed order.
• Bibby Financial Services - provides trade finance including purchase order funding alongside its invoice finance products. Good for businesses needing both.
• TradeBridge (formerly Woodsford TradeBridge) - non-bank working capital lender offering trade and supply chain finance.

For product businesses, working capital rather than sales is often the constraint on growth, and purchase order finance lifts the ceiling on how large an order you can accept.