Purchase Order Finance: A Conceptual Model with Economic Insights

Fehmi Tanrisever, Matthijs van Bergen and Matthew Reindorp

Foundations and Trends(R) in Technology, Information and Operations Management, 2017, vol. 10, issue 3-4, 305-323

Abstract: Purchase Order (PO) finance is a form of financial intermediation which can alleviate capital constraints in certain supply chains. PO finance is typically utilized by small and medium-sized enterprises (SMEs) that operate as importers, exporters, wholesalers, or distributors and have high sales growth. When applicable, PO finance creates value for the supply chain by providing capital that is not available through regular lending channels, due to informational problems. We provide a conceptual model that clarifies the value proposition of PO finance and describe how the transactions are carried out in practice. The conceptual model allows us to highlight the settings where economic conditions will favor the application of PO finance.

Keywords: Supplier financing; Supply chain finance; Cost of capital (search for similar items in EconPapers)
JEL-codes: G20 G32 M11 (search for similar items in EconPapers)
Date: 2017
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Citations: View citations in EconPapers (1)

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