For an NJ importer standing at the intersection of an $800,000 purchase order and an empty bank account, two financial products will be presented as solutions: Purchase Order (PO) Financing and Invoice Factoring. Both involve assigning receivable-related assets to a capital provider. Both charge fees. But they solve fundamentally different problems — and choosing the wrong one costs more money than the fees themselves.
The Core Distinction: When Does Capital Arrive?
Invoice Factoring provides capital after you have shipped goods, issued an invoice to your buyer, and assigned that invoice to the factor. You receive 70–90% of the invoice face value upfront; the factor collects from your buyer and remits the balance minus fees.
Purchase Order Financing provides capital before goods are manufactured — when your supplier requires a deposit or full payment to begin production. You receive capital against the confirmed purchase order from your creditworthy buyer; Sentinel pays your supplier directly.
For Port Newark importers: If your capital problem is paying your overseas supplier so they will begin production and ship your goods, that is a PO financing problem — not a factoring problem. Factoring cannot help you until you already have goods to deliver and an invoice to issue.
Product Comparison: Institutional Analysis
| Factor | PO Financing (Institutional) | Invoice Factoring | Sub-Prime MCA |
|---|---|---|---|
| Funding Trigger | Confirmed Purchase Order | Issued Invoice (post-shipment) | Revenue history / bank statements |
| Timing | Pre-shipment (before goods produced) | Post-shipment (after goods delivered) | Immediate (any stage) |
| Advance Rate | 80–90% of PO value | 70–90% of invoice face | 50–80% of future receivables |
| Effective APR | 18–36% | 24–60% | 40–150%+ |
| UCC Lien | Purchase-money security interest on PO | Blanket lien on all A/R | Blanket lien on all assets |
| Credit Decision Based On | Buyer creditworthiness | Buyer creditworthiness | Seller revenue history |
| Supplier Payment | Direct to supplier | After invoice collected | No supplier involvement |
| Max Facility Size | $100K – $10M+ | $50K – $5M | $10K – $500K |
| Best For | Pre-shipment capital gap | Post-shipment liquidity | Emergency cash, no alternatives |
UCC Lien Positioning: The Hidden Control Issue
Every commercial financing product files a UCC-1 financing statement. The lien type and coverage scope determine how multiple financing facilities can coexist.
PO Financing UCC-1 (Sentinel): Files a purchase-money security interest (PMSI) specific to the purchase order and the inventory purchased with the advance. This is a narrow lien — it does not blanket your other assets or receivables.
Factoring UCC-1: Most factors file a blanket lien on all accounts receivable — present and future. Once you have a factoring relationship, no other lender can take a senior position on your A/R without the factor's subordination agreement.
MCA UCC-1: Most MCA providers file blanket liens on all assets — A/R, inventory, equipment, intellectual property. This is the most restrictive lien structure and can prevent access to any institutional financing for the duration of the obligation.
Fee Structure: True Cost Comparison
PO Financing (Institutional): 2.5–4.5% for 60–90 day facilities. On $1M advanced for 90 days, total fee: $25,000–$45,000. Effective APR: 10–18% for well-structured transactions.
Recourse Factoring: 1.5–3.5% per 30 days. On $1M invoice with 60-day buyer payment terms: $30,000–$70,000 total. Effective APR: 18–42%.
Sub-prime MCA: Factor rate 1.3–1.5x. $500K advanced, repay $650K–$750K over 6 months from daily ACH withdrawals. Effective APR: 65–130%.
Interactive: PO Stepper — Product Selection Tool
Lateral Relevancy
Understanding UCC-1 lien mechanics is essential before selecting any financing product.
Ready to structure the right facility for your NJ import operation? Initialize your Funding Analysis or call (888) 653-0124.
DISCLAIMER: Sentinel Trade Finance | Carteret, NJ 07008 | (888) 653-0124 | For informational and educational purposes only. Not financial, legal, or tax advice. APR estimates are illustrative. Consult qualified advisors before selecting financing products. Financing subject to underwriting and approval.