Apparel Purchase Order Financing: A Growth Solution for Fashion Brands

Your next big order shouldn't be a cash flow problem—it should be a growth opportunity. But in the apparel industry, long production cycles, payment delays, and seasonal demand swings can tie up capital right when you need it the most. Whether you’re scaling inventory for a major retail launch, expanding your online presence, or funding a new collection, access to tailored working capital is critical.

This is where asset-based lending and purchase order (PO) financing come in. Together, they provide a powerful financing solution, giving you the liquidity you need to keep your business running smoothly and scale effectively. Let’s dive into how each works and how they complement each other.

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What is Purchase Order Financing?

For apparel brands, fulfilling large orders and meeting tight production deadlines often requires significant upfront costs. Purchase Order (PO) Financing allows you to cover the costs of purchasing materials or paying suppliers, enabling you to fulfill large orders without tying up your cash flow.

Here’s how PO Financing works:

Supplier Payments: If you have a large purchase order from a retailer but don’t have enough cash to pay your suppliers, PO financing steps in. A lender provides the funds necessary to pay your suppliers for the raw materials or finished goods.
No Upfront Capital Required: With PO financing, you don’t need to tap into your capital. Instead, the financing is repaid once the goods are sold, often after your customer pays for the order.

PO Financing is ideal for apparel brands that have large, time-sensitive orders but lack the liquidity to pay suppliers upfront. Whether you’re filling a major retailer order or fulfilling a high-demand season, PO Financing ensures you can meet deadlines without the financial strain.

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How ABL and PO Financing Work Together

While PO Financing can cover the immediate costs of fulfilling a large order, asset-based lending (ABL) can help manage the ongoing working capital needs and smooth out cash flow gaps. Together, these two financing solutions offer comprehensive financial flexibility.

Here’s how they complement each other:

PO Financing for Immediate Supplier Costs: You can use PO financing to pay suppliers and fulfill large orders without needing your cash up front. It helps you secure inventory or raw materials quickly and efficiently to meet production deadlines.
ABL for Ongoing Working Capital: Once the goods are produced and shipped, ABL steps in. It unlocks the value of your inventory and accounts receivable, giving you access to working capital based on the value of your assets or outstanding invoices. ABL allows you to pay back your PO financing and continue funding your operations as your business grows.

This combined approach ensures that your apparel brand has both the immediate funds needed to fulfill orders and the long-term liquidity required to keep growing. Whether you’re meeting an urgent order from a retailer or preparing for peak season, these financing tools work in tandem to support your business’s financial needs.

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Why ABL and PO Financing Are a Perfect Fit for Apparel Brands

Apparel brands face unique cash flow challenges, especially when scaling quickly or working with large, multi-channel orders. Here’s why these financing solutions are especially valuable for fashion businesses:

1. Unlock Capital Without Giving Up Equity

Unlike traditional financing, which often requires giving up equity in your business, both PO financing and ABL allow you to access funds without diluting ownership. You can retain full control over your business while securing the capital needed for growth.

2. Flexible Funding for Production & Growth

Whether you’re fulfilling large retailer orders with PO financing or using ABL to cover your inventory and receivables, both solutions offer flexible funding tailored to the apparel industry’s specific needs. PO financing covers upfront production costs, while ABL provides liquidity for ongoing operations, marketing, and inventory purchases.

3. Quick Access to Working Capital

Time is often of the essence in the fashion industry, and traditional financing options can be slow and cumbersome. Both PO financing and ABL provide faster access to funds, enabling you to meet tight production schedules, fulfill orders, and seize new opportunities without waiting for traditional loan approval processes.

4. Smooth Out Cash Flow Gaps

Growing apparel brands often experience fluctuating cash flow, especially when balancing seasonal demand, retail orders, and DTC sales. Purchase order financing and ABL together ensure you have continuous access to capital, smoothing out cash flow gaps caused by delayed payments or long production cycles.

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When Should Your Apparel Brand Consider ABL and PO Financing?

Here are key signs that ABL and PO financing might be the right solution for your business:

You Have Large, Time-Sensitive Orders: If you’re receiving large orders from retailers but lack the capital to pay your suppliers, PO financing can help you fulfill those orders quickly.
You Need Liquidity to Scale: If you need cash to buy more inventory or fund other growth initiatives, ABL can provide the working capital you need by leveraging your inventory and accounts receivable.
You’re Facing Seasonal Cash Flow Fluctuations: If you experience periods of low cash flow, ABL can help smooth those gaps by giving you access to capital based on your assets.
You’re Expanding Across Sales Channels: Whether you're selling through DTC, wholesale, or omnichannel platforms, both PO financing and ABL offer the flexibility needed to manage cash flow across multiple revenue streams.

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How to Structure an ABL and PO Financing Deal for Your Apparel Business

Once you decide that PO Financing and ABL are right for your business, here’s how to structure a deal with your lender:

Advance Rates
The amount you can borrow will depend on the value of your assets:
- PO Financing: Lenders can provide up to 100% of the funds required to purchase materials or pay suppliers for large orders.
- ABL: Typically, lenders advance up to 70% of the value of your inventory and up to 90% of your receivables.
Revolving Line of Credit
ABL typically offers a revolving line of credit, which allows you to borrow as needed based on the value of your assets. As your inventory and receivables grow, so will your borrowing capacity.

Repayment Flexibility
PO financing is repaid once the customer pays for the order. As you collect receivables or sell inventory, you repay the loan, freeing up room for more borrowing as needed.

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Best Practices for Managing Your ABL and PO Financing Facility

To maximize the effectiveness of your financing solutions, follow these best practices:

Monitor Your Accounts Receivable: Regularly track the aging of your receivables and ensure timely collection. Healthy receivables make borrowing more efficient and cost-effective.
Maintain Accurate Inventory Records: Ensure your inventory management system is up-to-date and reflects the value of your stock. Proper inventory control helps maximize the value of your ABL line.
Assess Cash Flow Regularly: Even with access to financing, it’s important to stay on top of your cash flow. Regularly review your financial health and ensure borrowed capital is used efficiently.

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Conclusion

For apparel and fashion brands with strong inventory and receivables, combining asset-based lending (ABL) with purchase order (PO) financing offers a powerful way to manage cash flow and fuel growth. PO financing ensures you have the funds to fulfill large orders, while ABL gives you ongoing liquidity to cover operational costs, inventory purchases, and expansion needs.

These flexible financing solutions work together to help you scale faster and more efficiently, without the delays and restrictions of traditional financing. Ready to unlock the capital you need to fuel your fashion brand’s growth?

Apply today to see how our tailored ABL and PO Financing solutions can support your business’s continued success.

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