By Shaun Bennett, Head of Sales, Teybridge Capital Europe
You’ve won the order and your customer is creditworthy… That’s a real opportunity. But the cash isn’t there yet, and that’s where most growing businesses hit a wall.
Two of the most effective working capital solutions for this exact problem are invoice finance and purchase order (PO) finance. Both unlock cash tied up in your trading cycle. But they do it at completely different points in that cycle, and understanding which one applies to your situation, or whether you need both, can be the difference between seizing an opportunity and letting it pass.
Invoice Finance vs PO Finance: The Core Difference
The simplest way to frame it is this: PO finance funds fulfilment before delivery; invoice finance unlocks cash after invoicing.
- Purchase order finance is used before you deliver goods or services. It covers the cost of paying your suppliers so you can actually fulfil the order.
- Invoice finance is used after delivery, unlocking cash tied up in invoices your customers haven’t paid yet.
Both solve a cash flow problem, they just solve it at different stages of the working capital cycle. Many businesses that trade goods, particularly those with longer supply chains or international customers, find they need both.
What Is Invoice Finance?
Invoice finance allows businesses to access cash tied up in unpaid B2B invoices, rather than waiting 30, 60, 90 or even 120 days for customers to pay.
How it works:
- You deliver goods or services and raise an invoice
- You submit the invoice to your funder
- The funder advances up to 90% of the invoice value, typically within 24 hours
- Your customer pays the invoice according to your agreed terms
- Once payment is received, the remaining balance is released to you, minus fees
Invoice finance is particularly powerful for businesses with strong sales revenue but frustrating gaps between delivery and payment.
Example: A food distributor supplies a major retailer (like Tesco’s) on 60-day payment terms, raising €200,000 in invoices each month. Using invoice finance, they access up to €180,000 within 24 hours of raising those invoices, keeping operations moving without waiting two months to get paid.
At Teybridge Capital Europe, we specialise in selective invoice finance, which means you can choose specific invoices to fund rather than committing your entire sales ledger. That flexibility makes it particularly well-suited to businesses with seasonal patterns, large one-off contracts, or high concentration in certain customers.
What Is Purchase Order Finance?
Purchase order finance solves a different problem: it gives you the capital to fulfil an order in the first place, before goods are delivered and before an invoice even exists.
How it works:
- Your customer issues a confirmed purchase order
- You apply for PO finance, submitting the order and supplier details
- The funder pays your supplier directly, around 60% of the purchase order value
- You fulfil the order and deliver to your customer
- Your customer pays and the finance is settled from the proceeds
PO finance is essentially a bridge between receiving an order and having the capital to deliver on it. Without it, a large order that should be a business breakthrough can become a logistical nightmare.
Example: A wholesale clothing business receives a €300,000 order from a European retailer but doesn’t have the cash to pay their manufacturer upfront. PO finance covers the supplier payment, the order is fulfilled, the retailer pays on terms, and the finance is repaid. The business captures growth it would otherwise have had to turn down.
Invoice Finance vs PO Finance: Key Differences at a Glance
| Invoice Finance | PO Finance | |
| When it’s used | After delivery, unlocking cash in unpaid invoices | Before delivery, funding supplier costs to fulfil an order |
| What it’s secured against | Your outstanding receivables (invoices) | The confirmed purchase order from your customer & the creditworthiness of the end customer |
| Who gets paid | You, the business | Your supplier, directly |
| Advance rate | Up to 90% of invoice value | Usually 60% of purchase order value |
| Best suited to | Businesses with strong invoicing activity and long payment terms | Businesses receiving large orders they lack upfront capital to fulfil |
| Repayment | When your customer pays the invoice | In many structured facilities, the PO finance is repaid once the resulting invoice is funded through invoice finance. Facilities often flow from one to the other. |
| Balance sheet impact | Asset-based; not traditional debt | Transaction-based; tied to a specific order |
When Should You Use Invoice Finance vs PO Finance?
Invoice finance may be the right fit if:
- You’ve already delivered goods or services and are waiting on payment
- You have a consistent flow of B2B invoices with 30–120 day payment terms
- You want to smooth cash flow without taking on traditional debt
- You have seasonal peaks that create recurring gaps in working capital
- You want to retain control of your customer relationships (via invoice discounting)
PO finance may be the right fit if:
- You’ve received a large order but don’t have the cash to pay your supplier upfront
- Your business is growing faster than your working capital can keep pace with
- You trade physical goods and your suppliers require payment before or on delivery
- You don’t want to turn down valuable contracts due to capital constraints
- You work with creditworthy customers and have confirmed, legally binding orders
Can You Use Both Invoice Finance and PO Finance Together?
Yes, and for many growing businesses, using both can be an effective approach. Think of them as two halves of the same working capital cycle:
PO finance covers the buy side, paying your supplier so you can fulfil the order.
Invoice finance covers the sell side, unlocking cash after delivery while you wait for your customer to pay.
Together, they fund the complete journey from confirmed order to received payment. This is what Teybridge Capital Europe refers to as a structured funding solution, combining complementary products to match the full shape of how your business trades.
Example: An Irish importer receives a large order from a UK retailer. PO finance covers the payment to their overseas manufacturer. Once goods are delivered and the invoice is raised, invoice finance unlocks the cash immediately rather than waiting 90 days for the retailer to pay. The business has funded the entire cycle without significantly straining its own working capital.
If you’d like to understand more about how invoice finance works in detail, including the difference between invoice factoring and invoice discounting, read our full guide here.
Why Growing Businesses Use Both Solutions
Across sectors, from food and drink and manufacturing to wholesale distribution and international trade, businesses use invoice finance and PO finance to:
- Fund growth without giving up equity or taking on long-term debt
- Accept larger orders than their current working capital would normally allow
- Manage longer payment terms from large or international customers
- Stabilise cash flow during rapid expansion or seasonal peaks
- Preserve relationships with suppliers by paying on time, consistently
Because both facilities are tied to your trading activity rather than fixed credit limits, they scale naturally with your business. As your orders get larger and your invoicing increases, so does your access to funding.
Of course, having the right funding in place is only part of the picture. Businesses that get the most out of trade finance tend to be the ones with a clear view of their financial position: up-to-date management accounts, a rolling cash flow forecast, and solid documentation processes. Our CFO Graeme Rate and Deal Analyst Charlie McCarthy explore exactly this in their guide How Strong Financial Management Unlocks the Full Value of Trade Finance for SMEs, well worth a read if you’re thinking about how to structure your approach before approaching a funder.
“`html “`Frequently Asked Questions
What is the main difference between invoice finance and PO finance?
Invoice finance unlocks cash tied up in invoices that have already been raised, in other words, after you’ve delivered goods or services. PO finance is used before delivery, covering the cost of paying your supplier so you can actually fulfil a customer order. They operate at different points in the sales cycle.
Can a business use invoice finance and PO finance at the same time?
Yes. Many businesses use both together to fund the complete working capital cycle, with PO finance to fulfil an order and invoice finance to access cash while waiting for the customer to pay. At Teybridge Capital Europe, we can structure facilities that combine both products when appropriate.
Do I need to have existing invoices to qualify for PO finance?
No. PO finance is secured against a confirmed purchase order, not existing receivables. What matters is the creditworthiness of your customer and the strength of the purchase order itself. Funders may like to see prior trading history with the customer.
Is PO finance more expensive than invoice finance?
Not necessarily. Pricing depends on the size of the transaction, the creditworthiness of your customer, and the complexity of the deal. At Teybridge Capital Europe, we provide clear, upfront fee structures for both products with no hidden surprises.
What types of businesses use PO finance?
PO finance is most commonly used by businesses that trade physical goods, particularly wholesalers, importers, distributors and manufacturers who receive orders from creditworthy buyers but need to pay suppliers before delivery.
Is invoice finance right for service businesses?
Yes. Invoice finance works well for any B2B business that raises invoices with payment terms, including service businesses such as recruitment, consulting, facilities management and logistics. The key requirement is that invoices are issued to creditworthy businesses for work that has been completed.
Does Teybridge Capital offer both invoice finance and PO finance?
Yes. We offer Invoice Finance as a standalone product and PO Finance as part of structured facilities combining multiple products. Our selective invoice finance approach also means you’re not required to commit your entire sales ledger. You can fund the invoices that matter most, when you need to.
Ready to explore the right working capital solution for your business? Get in touch with the Teybridge Capital team to discuss a structure that works for how you trade.
