Purchase order finance: a conceptual model with economic insights
Date
2017
Editor(s)
Advisor
Supervisor
Co-Advisor
Co-Supervisor
Instructor
Source Title
Foundations and Trends in Technology, Information and Operations Management
Print ISSN
1571-9545
Electronic ISSN
Publisher
Now Publishers Inc
Volume
10
Issue
3-4
Pages
305 - 323
Language
English
Type
Journal Title
Journal ISSN
Volume Title
Series
Abstract
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.