You won the order and cannot afford to deliver it. Purchase order funding exists for exactly that, and it is priced accordingly.
What it is
A funder advances the cost of fulfilling a confirmed order — usually paying your supplier directly — and is repaid when your customer pays. The order itself is the primary security.
It is short term and transaction-specific, not a facility you draw on freely.
When it fits
- You have a signed purchase order or contract
- The customer is creditworthy, often a government department or large corporate
- You can deliver if the stock or materials are funded
- Your margin can absorb the funding cost
What it does not fit
General working capital, salaries, or an order you might win. Without a confirmed order there is nothing to fund against.
The cost
Considerably more expensive than a term loan, priced per transaction over a short period. That can still be rational — an expensive facility that lets you complete a profitable order beats declining the work.
Take your gross margin on the order and subtract the funding cost. If what remains is thin, one delay in customer payment can turn the transaction into a loss.
Government payment terms are often 30 days from invoice and frequently longer in practice. Model the delay, not the promise.
What funders assess
| Factor | Why |
|---|---|
| Creditworthiness of your customer | They are the ultimate source of repayment |
| Validity of the order | Signed, priced, with delivery terms |
| Your ability to deliver | Capacity, track record, supplier relationships |
| Supplier pricing | Quotations supporting the funded amount |
| Margin on the transaction | Whether the deal survives the funding cost |
Prepare before you need it
Approval takes time you may not have once an order lands. Speak to funders before you bid, so the relationship exists when the order arrives.
If you bid for government work, read our guide on why small businesses lose tenders — underpricing to win and then being unable to fund delivery is a recurring pattern.
Get a funding-ready business plan
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General information, not financial advice. Funder criteria and products change. Confirm current requirements directly with the institution.