Stock and purchase order finance
Finance to pay suppliers for stock, or to fulfil a large customer order, repaid when the goods are sold. It lets you take on bigger orders, but fees are high and the money can only be used for those goods.
- Secured on invoices
- Secured on assets
How it works
When you need stock or materials before a customer pays, specialist finance can pay the supplier for you.
Purchase order finance, for a specific customer order:
- You get a purchase order from a creditworthy customer.
- The finance company pays your supplier, up to the full cost of the goods.
- You deliver the order and invoice the customer.
- The finance company collects payment from the customer, takes its fees, and passes the rest to you.
The decision rests mainly on the credit of your customer and supplier, so newer businesses and those with a weaker credit record may still qualify. The British Business Bank gives typical fees of 1.8% to 6%.
Stock or trade loans pay suppliers for stock and are repaid when you sell it. Some banks offer them as a revolving facility for regular stock purchases.
Larger businesses can borrow against the stock they hold as part of an asset-based lending facility, which is a separate route.
Upsides and downsides
Upsides
- Lets you take on large orders you could not otherwise fund
- Open to newer businesses, because it relies on your customer's and supplier's credit
- Quick once you have the order
- The finance company collects the customer's payment
Downsides
- Expensive compared with bank borrowing
- Can only be used for the goods in the order or facility
- Customers may not like dealing with a finance company
Risks
- Losing money if the supplier fails to deliver or the customer rejects the goods
- Customers worrying about your finances and buying elsewhere
What it costs
- How it is priced
- Fees on each order or advance, typically 1.8% to 6% for purchase order finance
- Costs that are easy to miss
- Fees on each order financed, which add up over a year
- Arrangement fees for stock facilities
- Your customer may deal directly with the finance company
Up to the full supplier cost of an approved order, or a facility limit for stock purchases.
Does it fit?
Could fit when
- You hold or buy in stock, and need to pay suppliers before your customers pay you
- You buy in stock or materials to resell or make into products
- You are exporting goods and need to pay suppliers up front
Unlikely to fit when
- You sell services, not physical goods
- You could use a cheaper overdraft or bank loan
Who can use it
- Business types: Sole trader, Partnership, Private limited company, LLP, Public limited company
- You sell physical goods and need to pay suppliers before your customer pays
- Purchase order finance needs a confirmed order from a creditworthy customer
- The supplier must be reliable enough to deliver
Am I ready?
What a provider is likely to ask for. Tick what you have. Your ticks stay in this browser and nothing is stored. Checklist for all asset-based and specialist lending
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0 of 3 ticked
- Confirmed purchase order
- Supplier quote and terms
- Margin worked out
Regulation and protections
Commercial finance (finance for businesses rather than consumers) is not generally subject to statutory conduct regulation in the UK. Read the contract carefully before you sign.
Types of provider: Specialist purchase order and trade finance companies; Banks offering trade or stock loans.
Also consider
Sources
- British Business Bank: Purchase order financing guide · checked 7 October 2026
- British Business Bank: Working capital finance options · checked 7 October 2026
- NatWest: Trade loans · checked 7 October 2026