Laminar Team · 4 min read
You've been working toward this for months. Maybe years. And then it happens. A national retailer places a purchase order. Or a major distributor wants to stock your product across 200 locations. Or your Amazon sales spike and you need to triple your next inventory run.
It's the best problem a product brand can have. And also one of the most stressful.
Because that purchase order is not money in your bank account. It's a promise to buy. You still need to pay your manufacturer, cover shipping, handle packaging, and deliver on time. And most of that cash needs to go out the door weeks or months before you see a single dollar back.
This is the cash flow gap that trips up growing brands more than almost anything else. Here's how to bridge it without draining your reserves or giving up equity.
Map the cash flow gap first
Before you start looking for financing, get specific about the numbers. How much capital do you actually need? When does it need to go out? When does payment come back in?
A typical retail order looks something like this. You get a PO in January. You need to pay your manufacturer in February. Goods ship in March. The retailer receives them in April. And if they're on net-60 terms, you get paid in June. That's a five-month gap between when your cash goes out and when it comes back.
Knowing the exact size and duration of that gap tells you which financing products make sense and how much they'll cost. A $200K gap over three months is a very different problem from a $200K gap over six months.
Option 1: PO financing for production costs
If you have a confirmed purchase order from a creditworthy buyer, PO financing is designed exactly for this situation. The lender pays your supplier directly, typically covering 70 to 100% of the supplier cost. You produce and ship the goods. Your buyer pays the invoice. The lender gets repaid from the proceeds.
The rates are higher than a traditional loan, typically 1.5 to 6% of the PO value as a factor fee plus 1 to 3% per month in carrying costs. But the lender is underwriting your buyer's credit, not yours. If Target or Costco is on the other end of that purchase order, you're in a strong position even if your brand is relatively new.
PO financing is especially useful when the order is large relative to your cash reserves. If a single order represents more than 30 to 40% of your available cash, financing the production makes sense rather than betting the business on one shipment.
Option 2: Inventory financing for stock you already have
If you've already manufactured the goods and they're sitting in a warehouse, inventory financing lets you borrow against their value. Lenders typically advance 50 to 80% of the appraised value of your finished goods.
This works well when you need to fund your next production run while your current inventory sells through. Or when you need working capital for marketing, hiring, or other growth expenses and your biggest asset is the product on your shelves.
The costs are generally lower than PO financing, with annual interest rates running 6 to 18% depending on the lender and the type of inventory. Finished consumer goods with strong demand get better rates than raw materials or niche products.
Option 3: Invoice factoring after you ship
Once you've fulfilled the order and sent the invoice, you're still waiting 30 to 90 days for the retailer to pay. Invoice factoring lets you sell that invoice to a factoring company for immediate cash, typically 80 to 95% of the invoice value within 24 to 48 hours.
Factoring fees usually run 1 to 5% of the invoice value. It's one of the fastest ways to convert a receivable into cash. And like PO financing, the factor cares about your buyer's ability to pay, not your credit score.
Stacking products together
Many growing brands use two or even three of these products in sequence on the same order. It sounds complicated, but the logic is straightforward.
You use PO financing to fund production. You ship the goods and invoice the retailer. Then you factor the invoice to get paid immediately, repay the PO lender, and pocket the margin. The full cycle might cost 8 to 12% of the order value across all products.
Whether that math works depends entirely on your gross margins. If you're operating at 50% or higher, financing the order and keeping the relationship with a major retailer is almost always worth it. If your margins are thinner, you need to run the numbers more carefully.
The key is understanding the total cost of capital across all products, not just each one in isolation. This is one of the things Laminar is built for. You see normalized costs across PO financing, factoring, inventory financing, and other products so you can plan the full stack before you commit.
Don't bet everything on one order
One piece of advice that comes up again and again from experienced CPG operators: don't overextend on a single massive order.
It's tempting to go all-in when a big retailer comes calling. But the smart move is usually to start with a regional test rather than a national rollout. Fulfill the first batch, prove your execution, build the relationship, then scale. Retailers expect this. They'd rather see you deliver reliably on a smaller order than stumble on a huge one.
This also makes the financing easier. A $75K production run is simpler to fund than a $500K one. And if the test goes well, you'll have a track record that gets you better rates on the next round.
Plan your financing before you need it
The founders who get the best deals are the ones who plan ahead. They don't wait until a purchase order lands to start figuring out how to fund it. They already know which products they'd use, which lenders they'd approach, and what the total cost would look like.
If you're a CPG, DTC, or ecommerce brand that's growing into retail or wholesale channels, start exploring your financing options now. Join our waitlist to see how Laminar can help you compare lenders and products before the next big order drops.