When I first started researching and covering procurement, it was rare to find an article in a popular newspaper or magazine about the area. But now, it seems to happen at least once a week. Just this weekend, The New York Times published a highly insightful piece on the high-interest, high-stakes world of purchase order financing. According to the story, “It is a relatively new line of business … and a twist on the ancient and much larger practice of factoring, in which a business sells an invoice at a discount to get its money faster, providing the factoring company with a hefty fee.” But, “Purchase-order financing, though similar to factoring, is further up the financial food chain. Purchase orders are written guarantees from a buyer that it is committed to purchasing a product. By financing purchase orders … [the lender] essentially pays the factory to manufacture the goods.”
All of this sounds useful enough. After all, purchase order lenders are stepping in where banks are stepping out…
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