Why PO Financing does NOT work for commodities transactions

Lately, I have seen an increase in the number of prospects looking to use purchase order financing to fund a commodities transaction. Unfortunately, these transactions seldom work. The pain reason why they don't work is that commodities usually sell for low margins - 5% to 10%. Purchase order financing only works for transactions where are margins are 20% and above. This ensures there is an adequate margin of safety if things don't go as planned.

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Looking for information on purchase order financing? Read the purchase order finance blog