In this example of purchase order financing, the goods are produced, packaged and ready for delivery to the company’s customer by the factory/supplier overseas. The order is completely fulfilled by the overseas supplier. The goods are paid for by purchase order financing and all that remains is the delivery of the product to the company’s customer.
In this case, the prospect could even be an early stage company or even a start-up with a good story. The purchase order lender’s reliance is on the finished goods being drop shipped directly to the company’s customer that mitigates the risk of the company touching the goods and any reliance on the company’s ability to perform in physically handling the goods. The risk is essentially transferred from the company to the factory producing the goods and third party logistics for handling the goods and/or staged at a third party warehouse for delivery to the company’s customer.