Suppliers want paying now and customers pay later. Work through supplier terms, purchase order finance, invoice finance and a line of credit, in order.
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Purchase Order Finance · Paying Suppliers · Timing Gap
Your supplier wants paying now and your customer pays later. That is a timing gap, not a failing business, and the right fix depends on how far off the customer's cash is.
Quick Answer
You pay suppliers before customers pay you by closing the timing gap in order: ask for longer trade terms, use purchase order finance against a confirmed order, use invoice finance once you have invoiced, then keep a line of credit for gaps that repeat.
Also called: purchase order funding, PO finance. Trade finance is related but usually tied to imports.
How do you pay suppliers before customers pay you?
You pay suppliers before customers pay you by matching the fix to the length of the gap, not by taking the first loan on offer. So the better question is not where to find the money. It is how far off the customer's cash is. At the start of an order it is a long way off and you hold a promise. Once the goods are delivered and invoiced it is much closer, and you hold something a funder can advance against.
Every business selling on terms runs an order to cash cycle. The customer orders, you buy the goods or materials, you deliver, you invoice, and the customer pays. Your supplier's due date lands somewhere in the middle of that, and the timing gap is the distance between that date and the day the customer's money arrives.
| Option | Where you are in the cycle | What it leans on | The main catch |
|---|---|---|---|
| Longer supplier terms | Before you place the order | Your payment record and the supplier's own cashflow | It moves the date and nothing else, and the supplier can say no |
| Purchase order finance | Confirmed order, goods not yet delivered | The customer order and the supplier delivering | Narrow fit, and it stops at a confirmed order |
| Invoice finance | Goods delivered and invoiced | The invoice and your customer's credit quality | No invoice, no funding, so it comes late for a supplier who wants paying upfront |
| Line of credit | Any point, for gaps that repeat | Your cashflow and, at times, security | The limit may be too small for one large order |
| Working capital loan | One large, one-off supplier or stock payment | Your turnover and trading history | Repayments keep running after the gap has closed |
This post is for a healthy business with that gap. If a supplier has already pulled your account, read the guide on a supplier moving you to cash on delivery instead. If the goods come from overseas, trade finance for importers is usually the closer fit. If the pressure is payroll and not suppliers, see funding wages while customers take long terms.
Can you get longer terms from your suppliers?
You can often get longer terms from a supplier, and it is the place to start because you are asking for time, not taking on new debt. Trade credit is simply the time a supplier allows you to pay for goods. A supplier who agrees to stretch it solves the problem without adding security, repayments or a facility to your balance sheet.
Supplier first, funder second. That order also helps if you end up at a funder, because you will be able to show what your terms are and that you tried to fix the timing at the source.
What makes a supplier agree?
A supplier agrees when the request looks low risk and worth keeping. Before you ask, line up the following:
- Your record. Show that you have paid on time, and ask while that is still true.
- A specific reason. A confirmed order from a named customer is easier to agree to than a general request for more time.
- Something in return. A part payment upfront, a volume commitment or a direct debit on the due date can all help.
- A narrow ask. Longer terms on one large order may be an easier yes than changing your whole account.
Get any change in writing, and check how late fees work under the new terms. Your supplier has its own cashflow, so a no is not a judgement on your business.
What is purchase order finance?
Purchase order finance is funding that pays your supplier against a confirmed customer order, before you have anything to invoice. The funder typically pays the supplier directly, the goods reach your customer, and the funder is repaid when the customer pays, often through invoice finance once the invoice exists. The structure varies by funder.
What lenders actually look at first is the order itself. A funder wants a confirmed order from a customer it can assess, a supplier that can deliver, and enough margin left on the job to cover the cost. A purchase order is a promise to buy, so the risk is that the goods arrive late, arrive wrong or get rejected.
Expect a funder to want security over the goods and, commonly, a general security agreement registered on the Personal Property Securities Register. If your bank already holds security over your business, that needs sorting out first. Borrowing against invoices walks through how those interests sit together.
How much does purchase order finance cost?
Purchase order finance usually costs a fee on the amount paid to your supplier, charged for as long as the money is out, often with a transaction fee on top. Pricing varies by funder, so ask for the total in dollars on your order.
When is it a stronger fit?
- A written, confirmed order from a creditworthy customer
- Finished goods you resell with little change
- A supplier with a clear delivery record
- A healthy margin on the order
- One order bigger than your usual cashflow can carry
When does it get tricky?
- Forecast, verbal or quoted work with no confirmed order
- Goods you still have to make or substantially change
- Customers who can cancel or return freely
- A thin margin once costs come out
- Many small orders, not one large one
Can invoice finance pay your suppliers?
Invoice finance can pay your suppliers, but only after you have issued an invoice, because the funder is advancing against money a customer already owes you. You receive part of the invoice value early, set by the advance rate, and you can use that cash for supplier bills. The balance comes to you, less fees, when the customer pays. See invoice finance for how we arrange it, and the full guide for how it works.
The timing is the test. If your supplier's terms run past your delivery date, invoice finance can close the gap neatly. If the supplier wants paying before the goods are delivered, invoice finance arrives too late on its own, and that is where purchase order finance or longer terms come in.
You also have a choice of scope. Funding one invoice suits an occasional gap, while a whole-ledger facility suits a business that invoices all the time. Turning an unpaid invoice into cash sets out the routes when the invoice is already on issue.
Whether it works depends mostly on who owes you. A funder will read your debtor book and may cap how much sits with one customer, which matters when one large customer is the reason for the gap. Before you sign, compare provider types and read the agreement clauses.
When does a line of credit fit better?
A line of credit fits better when the gap keeps coming back and does not hang off one order or one invoice. A business line of credit lets you draw what you need, repay it when customers pay and draw again, with interest typically charged on what you have drawn. Terms vary by lender.
That suits a business with many supplier bills and steady receipts, where setting up funding order by order would be more work than the gap deserves. It suits less well when one order is much larger than the limit you can get.
What lenders actually look at first on this kind of facility is how your account runs: your turnover, how you handle the peaks and whether the balance comes back down. That is why a facility is usually easier to arrange before the squeeze than during it.
If the gap is a single large payment and not a pattern, a working capital loan may fit better, because you borrow once and repay on a set schedule.
What order should you try them in?
Try them in the order that adds the least new debt for the gap you actually have, starting with the supplier and ending with a standing facility. Skip a step if it plainly does not apply.
- Measure the gap. Write down when the supplier is due and when this customer really pays, not what the invoice says.
- Check the customer's record. Do this before you promise your supplier a date.
- Ask the supplier. Longer terms on this order may close the gap on their own.
- Use purchase order finance if you hold a confirmed order and the supplier still wants paying before delivery.
- Use invoice finance once the goods are delivered and invoiced.
- Keep a line of credit for whatever gap still repeats.
How do you check a large customer's record?
You check a large customer's record on the Payment Times Reports Register. Reporting entities report every six months on payment times, terms and supply chain finance use, and those reports are published on the register, according to the Payment Times Reporting Regulator (read 2 November 2026). If the customer offers you a supply chain finance program, weigh that separately.
A broker can map which of these your business and your customers would support. More on the options sits on the Business Owners Hub.
Paying suppliers before customers pay is a sequencing problem. Fix the date with the supplier if you can, fund the order if it is confirmed, fund the invoice once it exists, and keep a line of credit for the gaps that repeat.
Key takeaway: measure how far off the customer's cash is, then go to the supplier before you go to a funder.Frequently Asked Questions
Invoices do not need to be paid immediately unless the terms say so, because the due date comes from what you and the supplier agreed. A tax invoice records the sale, and the payment date sits in your terms or on the invoice. If an invoice says it is due on receipt and you need longer, ask before the date passes, not after.
Supplier credit is the time a supplier allows a business to pay for goods after receiving them, and it is also called trade credit. It is usually set out in your trade terms. A supplier can generally review or change it, so a good payment record is worth protecting.
The difference between purchase order finance and inventory finance is what the funding is tied to. Purchase order finance is tied to a confirmed customer order, while inventory finance is tied to stock you buy or hold to sell later. Invoice finance is different again, because it is tied to your accounts receivable.
Purchase order finance without a confirmed customer order is generally not available, because the order is what the funder relies on. A forecast, a quote or a verbal promise usually will not do, though what counts as confirmed varies by funder. For stock bought ahead of orders, a line of credit is often the closer fit.
Paying suppliers with a business credit card can work for small, short gaps, if the supplier accepts cards and you can clear the balance before interest applies. Check for card surcharges first, because they can outweigh the benefit. It is a poor fit for large orders or repeat use, and if the real gap is an unpaid invoice, cashing that invoice may be the better route.
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