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Purchase Order Finance: A Conceptual Model with Economic Insights
Journal article   Open access   Peer reviewed

Purchase Order Finance: A Conceptual Model with Economic Insights

Fehmi Tanrisever, Matthijs van Bergen and Matthew Reindorp
Foundations and trends in technology, information, and operations management, v 10(3-4), pp 305-323
21 Dec 2017
DOI: https://doi.org/10.1561/0200000065
url
http://hdl.handle.net/11693/37538View
SubmittedOpen Access (License Unspecified),  Open

Abstract

Business Business, Economics and Politics Technology, Information and OM
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.

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