Oct 19, 2011

How AR and PO Financing Work [Infographic]

If you can’t qualify for a traditional business loan, or if you don’t have time to wait for those funds, there are other alternative financing options that might be the answer — especially when those funds will equal a big return.

AR and PO financing (accounts receivable and purchase order financing) are two choices for many business owners when they need immediate capital, or have lower credit scores.

How Accounts Receivable Financing Works

Accounts receivable financing is the selling of outstanding invoices or receivables at a discount to a finance or factoring company that assumes the risk on the receivables and provides quick cash to your business.

Basically, accounts receivables are given to the finance company, and the finance company spits it back out as cash in your pocket. How much they are worth depends on their age. More current invoices pay more. Any over 90 days are typically not financed.

Benefits of AR Financing

Standard Costs of AR Financing

There’s usually a service fee and interest. Those can vary. But there can also be hidden charges, including penalty fees, renewal fees, insurance costs and re-factoring charges for debts over 90 days old.

What is Purchase Order Financing?

Purchase Order Financing (or PO Financing) is a loan or advance, secured by a purchase order or contract, to pay for inputs, raw materials, packaging, goods for resale, etc., needed to produce and ship a product or deliver a service.

How Does PO Financing Work?

Benefits of PO Financing

Businesses that can benefit from PO Financing

Factoring Has Been a Growth Market

The rate of market growth for factoring was only 0.5% in 2008. Limited factoring growth in 2008 was consistent with past economic downturns. Factoring receivables experienced an increase of 9.2% in 2010.

Over 90% of businesses still wait for 30, 60 or 90 days to be paid. 73% factor on a non-recourse basis in which the lender assumes both the title and the risk of default.

This graphic should help you decide if AR or PO financing is right for you:


How AR and PO Financing Work [Infographic]





About the author


  1. Thanks for some very timely and informative content !We should be sending some of these type of Loan Requests to Lendio in the coming months ! Get Ready!
    Joseph Anthony Smith- President
    Northstar Financial Consultants, Inc.
    3 Bethesda Metro Center, Suite-700
    Bethesda, Maryland 20814
    Office-( 202 ) 520-1252
    E-mail:[email protected]
    October 26, 2011
    8:28 A.M., Eastern Time, U.S.A.

  2. I’m very interested in pursuing this avenue

  3. these people have knocked off your graphics..

This site uses Akismet to reduce spam. Learn how your comment data is processed.

Quickly Compare Loan Offers from Multiple Lenders

Compare Offers
from 300+ Lenders

Applying is free and won't impact your credit
Talk to a rep at (855) 853-6346

Mon–Fri | 9am–9pm ET

Phone Icon

Give us a call
(855) 853-6346

Monday - Friday | 9am - 9pm Eastern Time