Purchase Order Financing in Canada: How to Fund Big Orders (2026)

PO financing sits between three parties: you, your supplier and your customer. The funder never hands you cash to spend freely. It pays for the goods tied to one specific order, and that order is its main security.

The 5-Step PO Funding Path

1. You receive a firm, non-cancellable purchase order from a creditworthy customer.
2. You send the funder the PO, your supplier's quote or pro forma invoice, and the margin you expect on the deal.
3. The funder pays your supplier directly. Domestic suppliers are often paid by wire, while overseas suppliers are commonly paid through a letter of credit that releases funds once shipping and quality terms are met.
4. The goods ship to your customer and you send the invoice.
5. Your customer pays the funder (or a controlled account), the funder deducts its advance and fees, and the rest comes back to you.

Most funders cover part of your supplier cost, not the full order value. Advances of roughly 50% to 90% of supplier cost are common, so you may still need to cover freight, duties or part of the deposit yourself.

Who offers it

Canada's big banks rarely offer standalone PO financing, so most deals go through specialized trade finance firms. The Business Development Bank of Canada also runs a purchase order loan, built with Export Development Canada, that can cover up to 90% of the order with up to 18 months to repay. BDC's published minimums include at least 12 months of revenue and a good credit track record, which is exactly where many younger or recently declined businesses fall short.

For most applicants, access comes down to the strength of the order and the margin left after fees.

PO funders usually price per 30 days rather than per year. Published pricing from Canadian funders tends to land between about 2% and 6% per 30-day period, depending on order size, your customer's credit and how long they take to pay.

Monthly pricing makes the cost look smaller than it is. A fee of 3% per 30 days works out to roughly 36% a year on a simple basis, before any setup, due diligence or letter of credit charges.

A worked example

Back to the Laval distributor. Say the funder advances the full $120,000 supplier cost at 3% per 30 days, production and shipping take 30 days, and the retailer pays 60 days after delivery. That's three fee periods, or about $10,800. On a $60,000 gross margin, the distributor still keeps roughly $49,200.

Now run the same $180,000 order at a 15% margin. Supplier cost jumps to $153,000, three periods of fees come to about $13,770, and more than half of the $27,000 gross profit disappears. These figures are illustrative, not a quote. In practice, your margin decides whether PO financing works far more than the fee does.

Ask for the annual rate

Because PO fees can annualize above 35%, ask any funder to show the total cost as an annual percentage rate. Under the Criminal Code, the criminal interest rate is 35% APR. Commercial loans to a borrower that isn't an individual (an incorporated business, for example) get partial relief: loans over $10,000 up to $500,000 are capped at 48% APR, and loans above $500,000 are exempt. Whether a PO deal counts as a loan depends on how it's structured, so get the funder's explanation in writing. Our guide to the maximum legal interest rate in Canada covers how the cap applies to business borrowing.

If the fees would take more than a third of your profit on the order, change the structure before you sign. Shorter customer terms or a partial deposit from the buyer can cut the cost fast.

PO financing solves one problem: paying for goods before you've delivered them. Once the goods ship and the invoice goes out, other tools take over, and plenty of Canadian businesses use two of them on the same order.

The most useful pairing is PO financing plus factoring. The PO funder pays the supplier, you deliver, and a factor advances cash against the invoice, which pays off the PO funder right away and stops the 30-day fees from stacking up while your customer sits on 60-day terms. Our breakdown of invoice factoring costs in Canada covers that second half.

If big orders arrive every month rather than once or twice a year, compare a working capital loan against a line of credit instead. PO financing suits the occasional large order, not month-to-month working capital.

If the goods will sit in your warehouse for a while before they sell, inventory financing ties the loan to the stock instead of a single order.

PO funders underwrite the transaction more than the borrower. That's why a business with a bruised credit score or barely a year of history can sometimes get funded after a bank decline. It's also why a weak order gets turned down even when your own file looks spotless.

What funders check

• Your customer's credit, since a national retailer, a government buyer or an established B2B company is what funders want to see on the PO.
• A firm order, with fixed quantities, prices and delivery dates. Letters of intent and verbal commitments don't count.
• Your supplier's track record, ideally with proof of similar orders delivered on spec and on time.
• Your margin, because a thin one leaves nothing to absorb fees, delays or a partial rejection.
• Existing security. If your bank holds a general security agreement over your inventory and receivables, the PO funder may need a priority or subordination agreement before it can fund.

Where deals stall

The most common holdup is often an existing lender's registration against your business assets in the provincial personal property registry (the RDPRM in Quebec), which can take weeks to sort out once a PO funder asks for priority. Pull your own registration search early, before the customer's delivery clock starts.

Service businesses and custom work are a harder fit too. If what you're delivering is labour, software or a one-off build your customer could reject, most PO funders will pass, and a term loan or line of credit is the better conversation.

If a creditworthy customer hands you a firm order and your margin can absorb the fee, turning that order down to protect your cash is usually the more expensive decision.

Solid Capital is a Canadian alternative lender for business owners the big banks have declined or kept waiting. We read the full file, including bank statements, revenue history and the orders you're sitting on, not just a credit score. If a large order is exposing a working capital gap, start an application at solidcapital.ca: it takes about five minutes, there's no impact to your credit to apply, and a Canadian advisor reviews every file personally. You can see what happens next on our process page.

Before you accept a large order, run the margin math with the funder's fees included and confirm your supplier can deliver on time.

What is purchase order financing in Canada?

Purchase order financing is short-term funding that pays your supplier directly for goods tied to a confirmed customer order. The funder is repaid when your customer pays the invoice, deducts its fees, and sends you the remaining balance.

How much does purchase order financing cost?

Canadian PO funders usually charge per 30-day period, with published pricing often between about 2% and 6% per period. A 3% fee per 30 days is roughly 36% a year on a simple basis, so always compare the total fee against your profit on the order.

Can I get purchase order financing with bad credit?

Sometimes. PO funders weigh your customer's credit and the strength of the order more heavily than your own score, so a lower score is not automatically a deal breaker. Expect close questions about your supplier, your margin and any existing liens on your business assets.

What is the difference between purchase order financing and invoice factoring?

Purchase order financing pays your supplier before the goods are delivered. Invoice factoring advances cash after you have delivered and invoiced the customer. Many Canadian businesses use both on the same order, with the factoring advance paying off the PO funder.

Does BDC offer purchase order financing?

Yes. The Business Development Bank of Canada offers a purchase order loan, developed with Export Development Canada, that can cover up to 90% of an order with up to 18 months to repay. BDC's published minimums include at least 12 months of revenue and a good credit track record.

How long does purchase order financing take to approve?

It depends on how quickly the funder can verify your customer, your supplier and any existing security on your assets. Clean files with a well-known customer can move within a week or two, while deals that need a subordination agreement from your bank usually take longer.