Purchase order finance is a method of finance where the bank uses the purchase order awarded to a company, as a security for a short-term loan or overdraft.
The bank does not finance banned goods, anything that may be harmful to the environment, perishable goods such as vegetables and services such as maintenance or protracted installation contracts. When we analyse the purchase order given to the company we also examine the types of goods that they must deliver before the customer gets paid.
To provide the bank with a purchase order, at the very minimum there must a clear price and amount and quantity and description of goods, a latest delivery date and the terms of payment - whether the goods are payable upon or after installation.
Purchase order finance is offered to customers who have an account with FNB. If the company does not have an account it must first open an account then apply for purchase order finance.
The bank excludes construction projects for purchase order finance. It also excludes types of project that require high degree of performance before they customer receives payment. It is suited for straight forward delivery contracts where the company sources merchandise and delivers it to the relevant buyer based on the purchase order awarded.