Purchase Order Financing Calculator

Expensive money for an order you could not otherwise take.

Written and maintained by Mohit PatelLast checked August 4, 2026How we build these

Currency

Customer order value

Cost to fulfil it

Share the financier covers

Fee per 30 days

Days until the customer pays

Financing fee

$5,760

36.5% annualised

Amount financed$76,800

Gross profit on the order$54,000

Profit after financing$48,240

Share of profit taken10.7%

A 3% monthly fee is 36.5% annualised, expensive money by any normal standard, and entirely rational if it lets you take an order you could not otherwise fulfil. The comparison is against not having the order, not against a bank loan.

How the Purchase Order Financing Calculator works

A 3% monthly fee is expensive by any normal standard and entirely rational if it lets you fulfil an order you could not otherwise take. The comparison is against not having the order, not against a bank loan.

Also known as: PO financing cost · supplier order funding · trade finance calculator

How it differs from a loan

Purchase order finance pays your supplier directly against a confirmed customer order. It is not a general-purpose loan; the money never reaches you and can only be used for that transaction.

The structure is specific: you receive an order from a creditworthy customer, the financier verifies it, pays your supplier, the goods ship, the customer pays the financier, and the balance less fees comes to you. The financier is underwriting your customer more than they are underwriting you.

Which is why it is available to businesses that could not get a conventional loan. A small supplier with a large confirmed order from a solid retailer is exactly the case it exists for, and the alternative is turning the order down.

What it costs

Rates are typically quoted per 30 days on the funded amount, commonly 1.5% to 6%, and the transaction usually runs 30 to 90 days. So the cost on a 60 day cycle at 3% per 30 days is 6% of the funded amount.

Annualised that is 36% to 40%, which sounds extortionate and is the wrong comparison. The right comparison is against the margin on an order you could not otherwise fulfil, and against the alternative of declining it.

Work it. A £100,000 order at a 25% gross margin produces £25,000. Funding £75,000 of goods at 6% costs £4,500, leaving £20,500. That is clearly worth doing. The same order at a 12% margin produces £12,000 and costs £4,500, leaving £7,500 for the same risk and effort, which is a considerably less obvious call.

Where it fits and where it does not

It suits confirmed business-to-business orders from customers the financier can credit-check. Wholesale, trade and large retail orders are the natural cases.

It does not suit direct-to-consumer stock purchases, because there is no confirmed order to underwrite. Buying inventory in the hope of selling it is speculative from the financier's perspective and is priced as inventory finance instead, if it is available at all.

It also does not suit anything requiring significant transformation. Purchase order finance funds goods that ship substantially as bought. If you are buying components and manufacturing, the financier has no clear security in the intermediate stages, and the product they want is different.

The margin floor

Because the cost is a percentage of the goods rather than of the profit, low-margin business is disproportionately hurt. There is a floor below which the arithmetic stops working.

As a rough guide, purchase order finance at typical rates needs a gross margin above roughly 20% to leave a worthwhile return, and above 25% to be comfortable. Below 15% the financing cost consumes most of the profit and you are working for the financier.

The other floor is deal size. Fees and minimums mean small transactions are inefficient, and most providers have a minimum around £25,000 to £50,000. Below that the per-deal costs dominate and other funding is more appropriate.

Getting the mechanics right

The financier will usually want to control the payment path, which means your customer pays them rather than you. That has to be agreed with the customer, and some large buyers dislike it or have their own process for it.

Documentation is heavier than a loan. Purchase orders, supplier agreements, proof of delivery, and often direct communication between the financier and both your supplier and your customer. Businesses that find this uncomfortable should know about it before starting rather than midway through.

Timing is the practical risk. The whole structure depends on goods shipping and the customer paying on schedule. A delayed shipment extends the funding period and the cost, and a customer paying 30 days late turns a 6% transaction into a 9% one. Building that contingency into the margin calculation before accepting the order is the difference between a profitable deal and a lesson.

Where to go next

The Purchase Order Financing question rarely arrives on its own. These are the ones that usually come with it:

Inventory Financing Calculator — What share of gross profit the money costs.
Days Sales Outstanding Calculator — Revenue recognised, cash not received.
Line of Credit Cost Calculator — Fees on the facility, interest on the balance.
Etsy Fee Calculator — Every Etsy fee on one sale, itemised.

Not financial advice. Marketplace fees change, and they vary by country, plan and seller status. Every rate here is an editable default, not a quoted price, check the platform's current fee schedule before you price a product against it. This is not tax or business advice.

Frequently asked questions

What is purchase order financing?

A financier pays your supplier so you can fulfil a confirmed customer order, and is repaid when the customer pays. It is secured on the order rather than on your balance sheet.

What does it cost?

Commonly 2% to 5% per 30 days on the financed amount. On a 75-day cycle that is a substantial share of the gross profit on the order.

When does it make sense?

For a confirmed order from a creditworthy customer that you could not otherwise fund. Using it for speculative stock purchases is a different and much worse proposition.

What are the requirements?

A confirmed purchase order, a supplier the financier will pay directly, and a customer they consider creditworthy. Margins usually need to be healthy enough to absorb the fee.