Both purchase order funding and invoice discounting unlock cash that is tied up in your business, so it’s easy to assume they’re the same thing. They aren’t. The difference is when in the sales cycle you need the money, and choosing the right one can save you cost and stress.
The key difference: timing
- Purchase order funding helps you before you deliver. You have a confirmed order but need cash to pay your supplier and fulfil it.
- Invoice discounting helps you after you deliver. The work is done and the invoice is issued, but your customer hasn’t paid yet.
Think of it as two points on the same journey: order, supplier payment, delivery, invoice, customer payment. Purchase order funding covers the first half. Invoice discounting covers the second.
Which one fits your situation?
Choose purchase order funding if:
- You’ve won an order but can’t afford to buy the stock or materials
- You’re turning down work because of upfront costs
- You supply goods and depend on a third-party supplier
Choose invoice discounting if:
- You’ve already delivered and are waiting 30, 60, or 90 days to be paid
- Your sales are growing but cash flow lags behind
- You regularly invoice reliable business or government customers
Can you use both?
Yes, and many growing businesses do. A funder can finance the order up front, and once you deliver and invoice, the same transaction can move into invoice discounting until the customer pays. Using them together can cover the whole cycle, so cash is never stuck at any stage.
What about general business finance?
Not every need fits neatly into one of these. If you want working capital for equipment, expansion, or day-to-day operations, a broader business finance facility may suit you better. The right structure depends on your cash flow, your customers, and your plans.
Not sure which fits? Ask.
Choosing the wrong product costs money, so it’s worth talking it through. The team at PG Asset Finance can look at your situation and recommend a funding structure that fits. Request a Quote today to get started.
