Winning a large order without the cash to deliver it is one of the most common ways a small business fails, and it is avoidable. A signed contract or confirmed purchase order is an asset a lender will advance against, because the money is owed by a creditworthy buyer rather than by you. That is the whole basis of purchase order and contract finance.
The lender is assessing your customer as much as they are assessing you.
How it works
You present the confirmed order. The lender advances funds to buy stock, materials or pay for resources, often paying your suppliers directly. When the customer settles, the lender is repaid and you keep the balance less fees and interest.
Paying suppliers directly is common and deliberate, because it ensures the money buys what the application was based on.
What lenders check
The creditworthiness of the buyer, whether the order is genuinely confirmed rather than an expression of interest, whether you can actually deliver, and your own compliance: registration with current annual returns at the Companies and Intellectual Property Commission, tax status and business banking.
A purchase order from a large retailer or government department supports a better advance than one from an unknown buyer, because the risk sits mainly with the payer.
Work out whether the contract is worth taking
Convert all fees and interest into the total cost over the actual period, then compare it against the margin on the order. If the finance costs more than the margin, the contract is not worth having on those terms.
Also check the payment terms in the contract itself. An order paid at ninety days costs considerably more to finance than the same order paid at thirty, and that difference should be priced in or negotiated out.
Understand who carries the risk
Many arrangements are recourse, meaning you repay whether or not the customer pays. Establish this before signing, because a customer default with a recourse facility leaves you repaying finance for revenue you never received.
Confirm any credit provider is registered and authorised with the Financial Sector Conduct Authority before committing.
Frequently asked questions
What is purchase order finance?
An advance against a confirmed order, used to buy stock or materials, repaid when the customer settles. Suppliers are often paid directly.
What does the lender assess?
Mainly your customer’s creditworthiness, whether the order is genuinely confirmed, and whether you can deliver. Your compliance is checked too.
How do I know the contract is worth taking?
Compare the total finance cost over the actual period with the margin on the order. If it exceeds the margin, decline or renegotiate.
Do payment terms matter?
Considerably. An order paid at ninety days costs far more to finance than the same order at thirty, and that should be priced in.
What happens if my customer does not pay?
Under a recourse facility you still repay. Establish whether the arrangement is recourse before signing.
Further reading
Originally published in November 2018. Updated September 2026 into practical guidance on financing a contract you have already won.
