Growing businesses face cash flow challenges throughout the entire order fulfillment cycle. While purchase order financing solves supplier payment problems and invoice factoring addresses customer payment delays, the real power lies in combining PO financing and invoice factoring into an integrated solution. This strategic approach eliminates cash flow gaps from order receipt to final payment, enabling businesses to scale without capital constraints.
For Canadian distributors generating $1M+ in revenue, this combined approach transforms cash flow management from a constraint into a competitive advantage.
The Complete Cash Flow Challenge
The fundamental problem facing growing businesses is the extended cash conversion cycle. Companies must pay suppliers upfront or within 30 days, while customers often expect 60-90 day payment terms. This creates a cash flow gap often spanning three to four months or more, during which substantial capital remains tied up.
How the Combined Solution Works
The integrated approach creates seamless financial coverage throughout every stage:
Stage 1: Order Receipt and Supplier Payment PO financing provides capital to pay suppliers upfront. Capitally issues a promise to pay your supplier covering up to 100% of product cost, enabling manufacturing without depleting cash reserves.
Stage 2: Manufacturing and Delivery Capitally maintains oversight through independent quality inspections and shipping documentation, ensuring goods meet specifications while protecting all parties’ interests.
Stage 3: Invoice Generation and Immediate Cash Flow Once goods are delivered, you generate an invoice for the full sale amount. Capitally immediately purchases your invoice through factoring, providing typically 80% of the invoice value within 48 hours or less while settling the PO financing obligation.
Stage 4: Final Settlement When your customer pays, Capitally forwards the remaining “reserve” amount, completing the transaction. Throughout this process, you maintain positive cash flow while fulfilling orders that might otherwise be impossible.
Key Strategic Advantages
Comprehensive Coverage
The combination eliminates every cash flow gap in the order cycle. You never wait for capital to pay suppliers or for customers to pay invoices, creating predictable cash flow throughout operations.
Unlimited Scalability
Traditional financing limits growth to available credit lines. The combined approach scales with your order pipeline—larger orders mean larger financing capacity, enabling opportunities 5-10 times your normal capacity.
Competitive Advantages
Guaranteed access to working capital lets you offer competitive payment terms to customers while meeting all supplier obligations promptly. This creates advantages in winning larger contracts and securing better supplier terms.
Industry Applications
Distributors Managing Seasonal Peaks
Consumer goods distributors facing massive seasonal orders can use PO financing to secure inventory from suppliers, maintain cash flow during manufacturing, convert to invoice factoring upon delivery, and receive final settlement when customers pay.
Technology Companies with Large Corporate Orders
Technology distributors can secure components immediately, fulfill complex orders without cash flow strain, receive immediate payment through factoring, and scale to accept multiple large orders simultaneously.
Qualification Requirements
Customer Creditworthiness
Both solutions depend on customer creditworthiness. Capitally evaluates credit ratings, payment history, business size, and industry stability. For invoice factoring, we focus on your customers’ creditworthiness rather than your company’s credit history.
Your Financial Requirements
- Gross margins: 20%+ preferred (15% minimum)
- PO financing minimums: $100,000 to $250,000 per order
- Invoice factoring capacity: $10,000 to $5 million monthly
- Target businesses: $1M+ annual revenue companies
Operational Capabilities
Capitally evaluates supplier reliability, quality control capabilities, business stability, and operational systems that support growth and complex transaction management.
Cost Structure and ROI
While the combined approach costs more than traditional financing—typically 4-10% of order value depending significantly on time outstanding—the ROI is substantial when enabling profitable orders you would otherwise decline.
Example:
- Order Value: $500,000
- Gross Margin: 25% ($125,000)
- Combined Financing Cost: 4% ($20,000)
- Net Profit: $105,000
Without financing, this $105,000 profit opportunity disappears entirely. Additional benefits include early payment discounts, improved supplier relationships, competitive advantages, and enhanced cash flow predictability.
Technology and Support
Capitally provides comprehensive support for the combined approach:
- Mobile App and Web Portal: Access to fundings, collection notes, and payment records (including cheque and remittance copies)
- Fast Processing: Invoice factoring advances within 24-48 hours
- Accounting Integration: Currently in development for QuickBooks, Xero, and Sage
- Dedicated Support: Personal account managers who proactively keep you updated
Implementation Strategy
Success requires building relationships before you need financing, focusing on creditworthy customers, maintaining supplier partnerships, and documenting all transactions comprehensively.
The combined approach becomes particularly powerful when managing multiple large orders simultaneously, shifting business planning from “which orders can we afford?” to “which orders do we want to prioritize?”
Transform Your Working Capital Strategy
The combination of PO financing and invoice factoring creates comprehensive working capital coverage that eliminates cash flow constraints throughout the entire order fulfillment cycle. For businesses with $1M+ revenue, this integrated approach offers sustainable growth and competitive advantage.
By understanding how these solutions work together, businesses can transform cash flow challenges into growth opportunities. The key lies in recognizing that working capital solutions should support your entire business cycle, not just individual components.
Capitally’s integrated approach provides the comprehensive coverage that enables businesses to seize opportunities, build stronger relationships, and achieve sustainable growth in competitive markets. With proper implementation, this combined approach transforms cash flow management from a constraint into a competitive advantage.
