How it works |

What is Purchase Order Financing?

Purchase order financing is almost identical to factoring. Like factoring it is a form of asset-based lending, in which the repayment comes from the conversion of the purchase order to cash. Unlike factoring, the funding occurs when the buyer submits a purchase order to factor’s client.

How Purchase Order Financing works

The following chart describes the simple 5-Step process of PO Financing as executed by EHB Capital:

Step 1

Company B (Buyer) submits a purchase order to Company A (Seller) with the price and quantity needed.

Step 2

EHB Capital negotiates the advance against the purchase order and advances up to 60% of purchase order value.

Step 3

Company A delivers the product to Company B and agrees to 30-day repayment timeframe.

Step 4

After 30 days Company B executes payment for 100% of invoice value directly to EHB.

Step 5

Upon receiving 100% payment for invoice, EHB transfers the withheld 40% of invoice value net of service fee to Company A.