Purchase Order Financing

  • Access up to 60% of PO cost, with no collateral needed

  • Quick approval outcome in 48 hours

  • Personalized, low-interest rates from 1.5% a month

  • The simple application process, minimal documentation to apply

Benefits of purchase order financing

Need additional funds to buy inventory & complete customer orders? Increase your cash flow with a short-term purchase order financing loan to get extra funds at attractive, low-interest rates and take your business to the next level.

Advance cash to buy more goods & inventory

Stay competitive & keep up with seasonal demand

Short-term capital injection

Extra firepower to take on big jobs

Does your business offer 30 – 90-day payment terms on invoices?

Find out how your company could monetize invoices for immediate working capital through invoice financing: up to $500k, minimal docs required to apply.

What Is Purchase Order Financing?

Order Financing is a financing product directly provided by the Singapore financing companies.

Purchase Order Financing can use Purchase Order Financing to purchase goods and workforce costing for projects awarded to the borrower. This allows the business to obtain financing without taking a bank loan, and the proceeds can be applied directly to the project.

What Is The Criteria To Apply?

The criteria for applying for the Purchase Order Financing is as follows

Criteria Requirement
Company Type Sole Proprietors, LLPs and Private Limited companies are eligible to apply
Shareholding No Limitation
Incorporation Length No Limitation
Has an Invoice for Goods or Services been issued? Yes

All companies incorporated in Singapore who have a Purchase Order awarded or about to be awarded can apply. The condition for Purchase Order financing is that a PO has to have been issued or is about to be issued & the borrower is waiting for funding before starting the project.

How And Who Do I Apply To?

To apply the following documentation is required, but not limited to

Documentation Type Required?
6 months company bank statements Yes
2 Years Profit Loss and Balance Sheets Yes
2 Years Director’s Notice of Assessment (Income Tax) Yes
Director’s NRIC Yes
Signed Application Form Yes
Purchase Order Yes

Some Lenders That Offer
Purchase Order Financing Are Below

Financial Institutions

  • CIMB Bank Berhad

  • DBS Bank Ltd

  • Maybank Singapore Ltd

  • Oversea-Chinese Banking Corporation Ltd (OCBC Bank)

  • RHB Bank Berhad

  • Standard Chartered Bank

  • United Overseas Bank Ltd

The banks above can do Purchase Order Financing or a similar financing product.

Also, there is a basket of private lenders who can structure Purchase Order Financing at reasonable rates.

How Much Can I Loan?

Companies can loan up to 50% of the Purchase Order Value or Up to S$1,000,000, whichever is lower.

Should businesses require additional funds aside from Purchase Order Financing, they can apply for the SME Working Capital Loan or the Temporary Bridging Loan, allowing companies to borrow also up to S$1,000,000 and S$5,000,000. This is also useful for businesses seeking additional cash flow or for business expansion.

Collateral might or might not be needed for Purchase Order Financing, and in certain situations, a confirmation that the Purchase Order has been issued might be required.

The financing amount is calculated based on an LTV (Loan-to-Value) on the Purchase Order, which can go up to 50%

The following table illustrates how much funds you can take by Purchase Order Financing.

Purchase Order Value Loan To Value You Receive
$50,000 50% $25,000
$100,000 50% $50,000
$200,000 50% $100,000

How Long Can I Loan For?

The maximum tenure of the Purchase Order facility depends on the project length of the purchase order, including credit terms given to the client. In specific scenarios, where the project is broken down into different batches, they might repay the funds in distinct groupings.

An example of the repayments is in the table below.

Loan Period Total Amount Interest Rate (%)/Month Repayment Amount
30 days $100,000 1 101,100
60 days $100,000 1 102,200
90 days $100,000 1 104,400

*monthly repayments might vary and are subject to change

At the end of the payment terms, the company guarantees that their customers pay on time to the specified account. Unlike a Working Capital Loan, Purchase Order Financing is a short-term financing product that requires clients to make payments by the end of their payment terms. Late payment may result in additional costs, and also the funds are meant only to be used for that specific project.

What Are The Interest Rates Like?

Interest Rates depend on the lender but are in the range of 0.5% – 1% per month. The interest rate is much different from the different lenders in the market. We can help you identify the lender with the lowest rate & give a smooth and seamless application.

What Happens If I Decide To Pay Early?

For Purchase Order financing, if the project completes earlier plus you make an early repayment., the interest is calculated to the day that the repayment is made & pro-rated accordingly. Therefore it is always advisable to ensure payment from your customers sooner than later or complete the project as quickly as possible.

What If I Need More Than The Amount Approved?

The amount for the financing depends on the value of the purchase order up to 50%. Companies are only able to apply to one (1) lender for each purchase order. This means that if you finance a Purchase Order lender A, you are incapable of funding it again with lender B

If you need more than S$1,000,000, you can apply for the SME Temporary Bridging Loan (“TBL” ), Working Capital Loan (“WCL”), which goes up to S$5,000,000, or the Business Term Loan offered by banks.

What Happens If I Don’t Qualify?

Didn’t qualify for Purchase Order Financing? Don’t worry! Businesses still have a way to Working Capital and Temporary Bridging Loan and SME Micro Loan for Business loans in Singapore.

Equity Capital Solutions can assist in identifying why your application was not eligible for the WCL and help you again for a successful application.

For more excellent credit amounts up to S$5,000,000, you might want to explore applying for the Temporary Bridging Loan.

Conclusion

In summary, Purchase Order Financing can be a very useful product for businesses seeking to increase their cash flow or for business expansion without taking on an additional business loan. It can be done on an adhoc basis, giving businesses the flexibility to decide when to use such a facility. This is an important financing product for businesses looking to grow with cheaper capital costs and should be considered for every business.

How It Works

  • Make a Free Enquiry.

  • An Equity financing specialist will reach out to you for some simple details.
  • We work together with you for the documentation.
  • You relax and we do the heavy lifting for you.
  • We contact you when its approved for signing down the loan.

Do you have cash flow problems? Every company has a fair proportion of the issues with cash flow, especially during startups. Irrespective of the carefulness of dealing with your business finance plans, it will be a time to fight with your capital.

Novice and experienced business owners both know that additional funding is needed to address cash flow problems. How do you know which financing option best suits your needs with the various types of financing offered in the Philippine financial market? This is a quick tip: Explore your options and take account of seller qualifications and turnaround schedules. Should your sales soar and fail to support your customers, order financing is a viable and more popular way to address short-term cash flow issues driven by rapid growth with traditional loan financing.

Do you have cash flow problems? Each company has its fair share of cash flow issues, particularly during the startup phase. Whatever the extent to which you are careful about your business plans, it will be time to fight with your capital.

Both novices and experienced corporate owners know that additional finance is required to tackle cash flow problems. How do you do, with various types of capital financing on Philippine financial markets, which financing option is most appropriate for your needs? This is a quick tip: Explore your options and take into consideration supplier qualifications and schedules.

In the absence of your customers’ needs, the purchase of orders is a viable and increasingly popular option for short-term cash flow issues driven by quick growth if your sales suddenly increase and you can no longer meet your customers’ needs.

Buying an order is a financing option guaranteed through your purchase orders and is specifically designed to meet the needs of your growing business. For companies that need extra money to complete large customer orders, this is a valuable source of commercial funding. If the money you have on hand is not good enough to cover your single or multiple customer orders, the PO Financing is helpful to ensure you do not miss the business opportunity.

Order Financing is an alternative means of accessing working capital. Order Finance offers alternative options for corporate borrowing. Before invoicing the purchaser, SMEs may access funds payable to suppliers. The problem of cash flow poses significant issues for small enterprise owners.

For example, a buyer places a large order for a borrowing company. At present, there is insufficient liquidity for the borrower to pay the supplier early. The debtors, therefore, apply for financing from a financial institution to use the Office to access the liquidity.

Your buyer will send you a large order (a well-established, creditworthy corporate). A large order requires you to procure several components from your manufacturers ahead.

Imagine if you were a supplier of electronic components and you just received a million-unit order from Apple. To produce those microchips, you need chipsets and semiconductors from various manufacturers.

They will pay the total value of your PO less than a minimum fee if you opt for PO Financing. You pay your supplier directly from the company providing your PO financing. The supplier will then receive their money from the planned payment of your customer.

Depending on the company you are seeking funding from, the PO funding process may vary. Today, most companies move to online applications to simplify the overall business financing process. First Circle, a Philippine-based PO Financing company is offering financial support services to local businesses, is one of the companies in the Philippines that has taken the digital financial process.

Your transactions take place online at First Circle. You first have to register. You need to register. You will need your account to start the application process. The company will process your application and get back to you in the next 48 hours after successfully holing your documents. You can expect the cash to be received within five working days upon approval – provided that verification requirements are submitted in due course.

Small companies who buy goods in large quantities usually use purchase orders.

For example, a pet store might need to buy several kinds of dog food from a supplier and order several bags of any food type. This is the purchase order process used by the owner of the livestock shop to obtain the necessary goods:

  1. The shop owner notices they are low on inventory.
  2. The shop owner creates an order that sets out exactly what the supplier needs and how much they will pay for it.
  3. The supplier answers “yes,” as it can supply and accept the order.
  4. If the supplier is out of stock, they will discontinue a good, or if the order is canceled, other issues will arise. “No,” the provider may reply.
  5. The provider complies with the order and delivers the items on the agreed date.
  6. For the items purchased, the supplier issues a bill or sales fact.
  7. The purchaser pays for the product, and processing is done via the POS system of the seller.

Purchasers can also create special orders for large shipments or recurrent purchases in particular. The buyer can buy the same products on the same PO numbers many times with a standing purchase order.

A complete purchase order is a multi-delivery agreement for a fixed price between two parties over a specified period. Blanket orders usually come with discounts or other incentives between companies that have a strong relationship.

A classified loan is a default banking loan. Classified loans have unpaid interest and outstanding principal, but they don’t have to go past due. As a result, it is not known whether the bank can retrieve the borrower’s loan proceeds. Banks categorize credits in their books usually as negative assets.

Classified loans are all loans that the lender considers to be in danger of principal and interest defaults. Although risky, classified credit is not always in arrears—it is only at risk of default. So they don’t have to be over.

As indicated above, these loans are typically classified as assets by financial institutions on their books. These assets are defective because reimbursement is questionable because of borrowers’ creditworthiness. Banks usually categorize these loans as a precaution if they have to lose them. This will also reduce the risk for lenders.

There are several reasons why lenders may list loans as classified assets:

  • A creditor who takes over the portfolio of another financial institution can have more restrictive credit standards. It can therefore classify certain loans.
  • A significant fall in the loan score of a borrower. The lender may not close the account but may choose to keep a closer eye on it.
  • If there is uncertainty in the economy, this can cause changes to jobs and incomes for consumers. Therefore, lenders can more often categorize certain loans as classified when unemployment rises and revenue drops.

In some instances, where the loan is classified, the lenders can no longer give the lenders credit or tighten up their lending practices. Lenders may also be more inclined to increase debt collection attempts when borrowers fail to send letters or make calls.

Most PO financing firms charge rates and fees according to their customers’ time required to pay them. Some charge more and fewer than others, although the rates for the first 30–60 days are usually between 1% and 6%.

Then, the lenders will charge you as they wait more often. You are typically changed every ten days rather than every month. In this case, the rate decreases between 1% and 3 % lower than the one you charged for the first month. However, if your customers do not pay promptly, it will cost more in the long run.

You don’t have much to do with the rate you get and the ultimate borrowing cost. Initial rates are based on your supplier’s reputation and customers’ creditworthiness because the product is produced and the lender is paid.

Working with a reliable, quick supplier will simplify the securing of affordable order financing. Similarly, if your client is a risk (not to redeem the lender), the opposite will happen and increase your overall borrowing costs.

Procurement financing is certainly not the costliest type of corporate financing. For example, short-term loans and commercial cash advances are more affordable. However, over time, the PO loan fees may add up. Every month suppliers charge around 1.8% to 6%. You can convert PO financing into an annual percentage (APR) rate from 20% to 75%. It’s costlier than a bank loan or a loan from FR Capital.

Order financing is an excellent product for providing enterprises with access to capital for significant projects and growth. You can access the money and not sacrifice cash flow with purchase order financing. In comparison with the advantages of this product, the costs and benefit analyzes are minimal. Your goods and orders merit a working solution.

Your partner is the purchase order financer to evaluate any risk during the transaction so that your overall operation does not cause trouble or disturbance. It’s for a good reason that the purchase order finance enterprise says no to a particular transaction. Recall that approvals are specific for each transaction, and acceptance are sometimes declined for some transactions. It’s just one case at a time.

If you meet the qualifications, we recommend purchasing order funding because it’s a fantastic product to add to your toolbox. Make sure you have the correct order financing company with you to help with custom orders.

Financing from purchase orders (POs) has gained popularity for re-sellers and wholesalers with large purchase orders. The solution has many advantages and advantages that enable it to fund developing businesses without working capital efficiently.

Would you please review our section on funding learning if you would like to learn how PO financing works?

Understanding the rates

Most companies financing purchasing orders charge rates based on the funds used. The funds used to pay your provider are the funds outstanding. For example, if the PO financing firm has to pay S$140,000 (for you), its rate is based on S$140,000.

For large purchases with milestones, many finance firms use a tiered structure. Let’s say, for example, your company purchases a value of S$1,400,000. The three installments pay for it: 20% deposit, 30% mid-point deposit, and 50% shipping.

Since each payment takes place at a different time, each amount may be financed autonomously by the finance company. You benefit from this approach because it costs less.

Average purchase order financing rates

Financing rates for orders purchased on the funds used average 3% for 30 days. Tariffs may increase or decrease based on the transaction.

Tariffs vary according to transaction size and complexity. The rates also differ based on the company’s reputation for producing your products and the customer making the final purchase.

Rate structure

The proposals of every purchase order financing company differ; the following models are, however, standard. These examples assume that the rate is 3% per 30:

  • 3% for the first 30 days, 1% per 10 days after that
  • 3% for the first 30 days, 0.1% per day after that
  • 2% per 20 days, 1% per 10 days after that

Minimums

Many financial firms handle only a specific size of transactions. In addition, they only work with customers who need a minimum amount of annual funding.

Based on the company, minimum levels vary. Make sure you understand how each provider works because they can influence the cost of your transaction.

Selecting a purchase order funding company

Many companies err in choosing their financial company alone based on the rate. It’s not the only variable, although costs are critical. To select your company’s best order finance company, concentrate on:

  • Their industry experience
  • The transaction flexibility
  • Their capital sources
  • Transaction costs
  • Transaction minimums

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About FR Capital

FR Capital is a Singapore consultancy firm that helps SMEs to secure business loans from banks and financial institutions. We concentrate on SME finance, and through our expertise and network, we help clients secure funding with low-interest rates efficiently and hassle-free.