About LPO Financing
LPO financing, also known as Local Purchase Order financing, is a form of trade finance that provides funding to businesses based on their purchase orders from reputable buyers or customers. It is a specialized financing solution that helps businesses manage their cash flow by converting their confirmed purchase orders into working capital.
When a business receives a purchase order from a customer, it signifies an intent to purchase goods or services. However, fulfilling that purchase order often requires the business to invest in inventory, raw materials, labor, and other operational expenses. This can create a cash flow gap, as the business needs funds to fulfill the order before receiving payment from the customer.
LPO financing addresses this challenge by providing businesses with the necessary funds to fulfill their purchase orders. The financing provider assesses the creditworthiness of the buyer and the reliability of the purchase order before approving the financing. Once approved, the financing provider disburses funds to the business, allowing them to procure the necessary goods or services to fulfill the purchase order.
Repayment terms for LPO financing vary depending on the agreement between the financing provider and the business. The repayment is typically structured in a way that aligns with the expected payment from the buyer. Once the buyer pays for the goods or services, the business repays the financing provider from the received payment.
LPO financing offers several benefits to businesses. It helps them seize growth opportunities by fulfilling larger orders and expanding their customer base. It also improves cash flow by providing the necessary working capital to cover the costs associated with fulfilling purchase orders. Additionally, LPO financing reduces the risk of non-payment or late payment from customers, as the financing is often based on reputable buyers.
It’s important to note that LPO financing is typically available to businesses with a track record of successful operations and reliable buyers. The financing provider may require supporting documentation, such as the purchase order, buyer information, and other relevant documents, to assess the viability of the financing.
Suppliers to reputable procuring entities are able to access professionally structured financing with customised repayments to match cash conversion cycle.
- Original LPO / LSO / Contract.
- Pro-forma invoices for the goods to be supplied / break-down of costs.
- Tangible security eg. Logbook or Title Deed.
- Evidence of similar past jobs done through past invoices and delivery notes.