The difference between invoice factoring and purchase order financing is relative to the work being done and the risks involved. You cannot use accounts receivable factoring until the work is completed and accepted by the customer. Whether you are providing a service or selling a product, the customer has to be satisfied with the work before the invoice can be financed. Pre-billing for work is not acceptable. The risk for repayment is based on the creditworthiness of the customer, therefore it costs less than P.O. financing.
Purchase Order financing is for companies that have a proven track record for performance. When your company has been around for a while and shows that it can complete the order as a regular course of business. Once the P.O. has been verified, money can be advanced to help fulfill the order. Once the order is delivered the P.O. finance advance must be paid off. Therefore many companies use factoring in conjunction with P.O. financing so that the finance goes through without interruption. P.O. financing is based on the performance, so it is riskier and more expensive.
Knowing when to use either factoring or P.O. financing is important when asking for help.