You’re facing a funding crunch that traditional banks won’t touch, but specialized PO financing firms are revolutionizing defense contractor cash flowThe net amount of cash moving in and out of a business..
Companies like SouthStar Capital and Liquid Capital convert your signed purchase orders into immediate working capital without equity stakes or rigid contracts.
They understand DoD compliance requirements and CMMC demands, letting you keep production moving while managing supply chain pressures.
These customized solutions cut through the bureaucratic noise, giving you the financial agility to compete.
The specifics of how these deals actually work and which ones suit your situation reveal powerful strategies waiting ahead.
Key Takeaways
- Purchase order financing converts signed defense contracts into immediate working capital without traditional bank credit requirements or lengthy approval processes.
- Assignment of ClaimsA legal transfer of rights to be paid, often used by governm Act enables contractors to assign future DoD contract payments directly to lenders, accelerating cash flowThe net amount of cash moving in and out of a business. for operational needs.
- Specialized defense financiers like SouthStar Capital and Liquid Capital offer rapid funding verification and flexible terms tailored to tactical and aerospace suppliers.
- Combined PO and accounts receivable facilities provide non-dilutive capital structures requiring no equity stakes, only purchase orders as collateralAn asset pledged by a borrower to secure a loan, subject to backing.
- Qualifying contractors must demonstrate performance history, credible purchase orders, and production capacity alignment with investment needs to access defense-sector financing.
The Defense Liquidity Gap: Why Traditional Banks Are Retreating
When you’ve just landed a major defense contract, the last thing you want to hear from your bank is “we’re not comfortable with that sector at the present moment”, yet that’s exactly what’s happening across the financial industry.
Banks are retreating from defense financing due to ESG policies, leaving contractors facing a critical funding gap at the worst possible moment.
Traditional lenders are pulling back from defense contract financing owing to ESG policies and perceived sector risks, leaving contractors in a bind.
Meanwhile, your supply chain demands immediate capital for materials, labor, and CMMC compliance investments. That’s where prime contractor supply chain loans step in.
These specialized lenders understand far-compliant trade finance and the unique rhythms of government procurement. They recognize your Purchase Order as collateralAn asset pledged by a borrower to secure a loan, subject to and your delivery track record as currency. As defense budgets shift toward AI and autonomous systems, the complexity of supply chain financing deepens, requiring lenders who grasp both traditional procurement cycles and emerging technology investments.
They’re not retreating, they’re advancing where banks won’t.
How Purchase Order Financing Works For DoD Suppliers
When you’ve got a signed purchase order from the DoD in your hands, you’re sitting on something important, but you still can’t buy the titanium, specialized components, or labor needed to fulfill it without cash upfront, which is where the Assignment of ClaimsA legal transfer of rights to be paid, often used by governm Act becomes your financial lifeline. Alternative lenders help businesses like yours by evaluating real-time cash flowThe net amount of cash moving in and out of a business. rather than relying exclusively on credit scores, opening avenues for quicker access to funds through cash flow-based financing.
PO financing lets you tap into that government contract immediately by having lenders pay your suppliers directly while you bridge the gap between delivery and when Uncle Sam actually cuts the check (typically within 15 hours, though “typical” and “government” don’t always move at the same speed). This approach has proven particularly effective for small suppliers securing large government contracts, enabling them to access capital that would otherwise be unavailable through traditional lending.
You’re fundamentally converting your guaranteed government payment into working capital right now, so you can keep production moving without draining your bank account or taking on debt that dilutes your company. Providing consistent bank statements verifying deposits and revenue growth can further improve your chances with alternative lenders offering this type of financing.
Understanding The Assignment Of Claims Act
The Assignment of ClaimsA legal transfer of rights to be paid, often used by governm Act, passed way back in 1940 but still your secret weapon today, is fundamentally the government’s permission slip for you to turn future contract payments into immediate cash.
Here’s how it works: you assign your right to receive money from a DoD contract to a lender, who then provides upfront funding for materials and production costs. When the government pays your contract, that payment goes directly to your lender initially. The minimum contract payment threshold of $1,000 means most supplier arrangements qualify for this financing structure.
This arrangement lets you access defense industry working capital without waiting months for reimbursement. It’s basically a government contract bridge loanShort-term financing used to bridge the gap until permanent that keeps your operations flowing smoothly.
For DoD supplier funding, the Assignment of ClaimsA legal transfer of rights to be paid, often used by governm Act removes the biggest obstacle: cash flowThe net amount of cash moving in and out of a business. timing. Your lender gets legal protection because the government guarantees payment, which means you qualify for better rates and quicker approvals.
Funding Raw Materials For Mission-Critical Orders
- Direct supplier payment – Lenders fund your raw materials immediately after PO approval, letting you skip the cash on hand squeeze that derails most contractors.
- Staged funding releases – Whether you are scaling aerospace purchase order credit or managing GSA contract financing, you control when capital flows to suppliers across your production timeline.
- CMMC compliance funding – Your lender covers compliance costs alongside materials, ensuring you maintain security certifications without draining reserves. Contract financing payments authorized under FAR Part 32 are disbursed prior to acceptance of supplies or services, allowing you to manage cash flowThe net amount of cash moving in and out of a business. during contract execution without waiting for government invoice payments.
You are no longer waiting. You are producing.
Bridging The Gap Between Delivery And Government Net-Terms
You’ve got the contract signed, production’s ramping up, and your suppliers are calling—but here’s the catch: you won’t see a dime from the government for 60+ periods while your vendors expect payment in 15. That’s where PO financing steps in as your financial bridge.
Here’s how it works: once your order ships towards the government, your financing partner converts the arrangement into invoice factoringSelling accounts receivable (invoices) to a third party at a. They’ll advance you 90-100% of your invoice value immediately, then handle collection directly from DoD payment systems. You get working capital flowing without the agonizing wait. Financing rates for defense contracts typically range from 1.8% to 6% per month, depending on your customer’s credit profile and order complexity.
Whether you’re scaling tactical gear manufacturing capital or assembling specialized components, this two-stage approach keeps your operations humming. Your suppliers get paid timely, you maintain momentum, and the government eventually settles the full balance.
It’s the innovation your supply chain needs.
10 Purchase Order Financing Deals For Defense Contractors Reviewed
You’ve got options, and that’s the good news, we’ve vetted five PO financing partners who actually understand the defense sector‘s unique demands rather than treating you like any other commercial borrower.
Each one specializes in a different slice of the defense pie, whether you’re chasing Tier-1 subcontracts, international sourcing, rapid production cycles, cybersecurity hardware, or massive GSA agreements. Small businesses particularly struggle with capital access barriers that make traditional financing options unavailable, making specialized defense sector lenders essential for maintaining cash flowThe net amount of cash moving in and out of a business. during lengthy weapon system production timelines. These lenders often evaluate financing based on cash flowThe net amount of cash moving in and out of a business. patterns rather than credit scores, enabling faster access to working capital.
Let’s break down which lender matches your mission so you can stop leaving money upon the table.
1. SouthStar Capital: Best For Tier-1 Prime Contractor Subcontracts
The subcontractor’s dilemma is as old as defense procurement itself: you’ve landed a sweet deal as a subcontractor to a Tier-1 prime, but now you’re facing the cash flowThe net amount of cash moving in and out of a business. squeeze that comes with fronting supplier costs while waiting 30, 60, or even 90 periods for payment from your prime contractor.
SouthStar Capital specializes in solving exactly this problem.
Here’s what they bring to the table:
- Rapid funding – Capital allocates within 24 hours post-verification, so you’re not stuck waiting around
- Prime contractor knowledge – They manage Tier-1 relationships and contract subtleties with ease
- Flexible structures – Combined PO and A/R facilities bridge your supplier payments until invoices hit
You maintain ownership, hit delivery milestones, and scale without cash flowThe net amount of cash moving in and out of a business. interruptions. This approach has enabled early-stage contractors to successfully fulfill government contracts valued at $250,000 or more while maintaining credibility with suppliers. That’s innovation in working capital.
2. King Trade Capital: Best For International Aerospace Sourcing
While SouthStar Capital manages the domestic supply chain squeeze between you and your prime contractor, there’s another beast altogether when your aerospace components come from halfway around the globe.
King Trade Capital specializes in global sourcing, funding everything from Taiwan chipsets to European titanium suppliers. They’ve financed over $22MM in cross-border production deals, meaning you’re not stuck waiting months for payment to clear customs.
| Capability | Coverage | Result |
|---|---|---|
| International PO Finance | Taiwan, China, Mexico | 30-day funding |
| Import Financing | Up to $22MM deals | Zero currency risk |
| Government Deliveries | Iraq, Afghanistan contracts | Verified repayment |
Their 32-year track record means they understand the Assignment of ClaimsA legal transfer of rights to be paid, often used by governm Act across borders. You focus on innovation; they handle the geopolitical payment logistics.
3. Liquid Capital: Top Choice For Rapid Tactical Gear Production
When you’re sitting in a massive tactical gear contract but your bank account’s looking thinner than your supply chain margins, Liquid Capital’s Purchase Financing Program is exactly what you need for avoiding the production gridlock that kills otherwise solid deals.
Here’s why they’re built for your situation:
- Fast funding decisions arrive in under 24 hours, so you’re not burning calendar periods waiting for approvals
- Zero rigid contracts mean you stay flexible when supplier deals shift or quantities change mid-production
- 24/7 online support keeps your team moving without banking hours slowing you down
Their network understands defense production like nobody else.
They’ve funded thousands of companies through North America, utilizing over $3 billion in working capital.
Your tactical gear order becomes your financial engine instead of your stress headache.
4. SMB Compass: Best For High-Tech Cybersecurity Hardware Suppliers
Your cybersecurity hardware startup’s got the defense contract everyone dreams about, but you’re staring down a supply chain reality check: your supplier wants payment upfront, your customer won’t pay until delivery, and your bank’s treating you like you’re yesterday’s news.
That’s where SMB Compass steps in. They fund up to 100% of your purchase order value, sending cash straight to your suppliers while you focus upon fulfilling the mission.
With rates between 1.5%–3.5% monthly and funding decisions in under 24 hours, you’re not waiting weeks for approvals. They understand high-tech hardware margins and defense sector timelines.
No collateralAn asset pledged by a borrower to secure a loan, subject to needed beyond your PO itself. You’ve got the talent and the contract—SMB Compass provides the financial agility to scale without sacrificing ownership.
5. 1st Commercial Credit: Best For Large-Scale GSA Contract Fulfillment
The difference between landing a massive GSA contract and actually fulfilling that often comes down to one thing: having the cash to move initially.
You’ve won the contract—now what? 1st Commercial Credit gets this. They specialize in large-scale GSA contract financing, meaning they understand the unique payment rhythms associated with government procurement.
Here’s what they bring in the table:
- Fast funding cycles that align with your production timelines, not bureaucratic delays
- Expertise in Assignment of ClaimsA legal transfer of rights to be paid, often used by governm, so you’re never caught off-guard by payment procedures
- Support for high-concentration orders, even when a single invoice hits six figures
You maintain control of your company while they handle the financial bridge. That’s how you scale GSA work without breaking the bank.
6. Riviera Finance: Best For Combined PO And Government Invoice Factoring
You land a $2 million purchase order from a Tier-1 prime, and instead of celebrating, you’re sweating about how to fund your suppliers while waiting 60+ periods for government payment.
Riviera Finance solves this exact problem by combining PO financing with invoice factoringSelling accounts receivable (invoices) to a third party at a. They’ll fund your supplier payments upfront, then advance you up to 95% upon invoices post-delivery, typically within 24 hours.
What makes them stand out? They’re seasoned with government contracts and non-recourse options, meaning you’re covered if your customer defaults.
Their process is invigoratingly simple: submit documents, get approved in 1-2 periods, and start submitting invoices daily.
You don’t factor everything, just what you need. That flexibility keeps your cash flowing without equity dilutionThe reduction in ownership percentage of existing shareholde or traditional debt hanging over your head.
7. Star Funding: Best For Finished Tactical Goods Procurement
you’ve got a signed purchase order for finished tactical goods—body armor, communication systems, load-bearing equipment—but your supplier needs payment before they’ll ship, and you can’t access government funds until delivery’s complete.
Star Funding solves this timing nightmare. They specialize in exactly what you’re facing:
- Fast capital allocation – They fund finished goods procurement in short periods, not weeks, keeping your supply chain moving.
- Tactical goods knowledge – They understand body armor specs, comms equipment, and specialized gear better than traditional lenders.
- No ownership dilutionThe reduction in ownership percentage of existing shareholde – You get non-dilutive capital that bridges the gap between supplier payment and government reimbursement.
You’ll never miss a delivery milestone again. That reliability? This is your competitive edge.
8. PurchaseOrderFinancing.com: Best For Multi-Stage Manufacturing Deals
While Star Funding handles the immediate crunch with finished goods sitting in your supplier’s warehouse, many defense contractors face a stickier problem: orders that don’t arrive as complete packages. PurchaseOrderFinancing.com specializes in exactly that scenario, complex, phased manufacturing timelines where you need capital flowing at multiple production stages.
They fund your supplier costs fully across each manufacturing phase, freeing your cash for payroll and compliance expenses. Whether you’re managing a six-month production run or coordinating multiple subcontractors, they structure deals in weeks without requiring equity stakes.
They understand IDIQs, task orders, and GSA schedules. The result is your production never stalls, your ownership stays intact, and you consistently hit delivery milestones that make you the contractor primes actually want to work with.
9. Rosenthal & Rosenthal: Best For Established Enterprise Defense Firms
When your defense firm’s got multi-million dollar contracts lined up and the only thing standing between you and fulfillment is a capital crunch, Rosenthal & Rosenthal brings nearly nine decades in lending muscle at the table.
Here’s what you get with them:
- Serious scale—they’ve closed deals ranging from $500K through $40MM+, including a $4.5MM facility for an Alaska government services firm and $4MM for aerospace-defense manufacturers.
- Smart structures—they blend PO financing with intercreditor agreements and factoringSelling accounts receivable (invoices) to a third party at a, handling everything from supplier payments through freight and import costs.
- Speed that matters—they execute quickly enough to keep you from missing contract deadlines or growth windows.
For established firms ready to scale without equity dilutionThe reduction in ownership percentage of existing shareholde, they’re your financial backbone.
10. Accord Financial: Best For CMMC Compliance And Asset-Based Bridge Loans
Rosenthal & Rosenthal handles the heavy lifting for established firms, but what if your defense contractor operation is growing rapidly and you need something different, something built specifically around your assets and your CMMC obligations?
Accord Financial gets it. They specialize in asset-based bridge loans that release your accounts receivable, inventory, and equipment value without diluting your ownership.
You’re not just getting capital; you’re getting a partner who understands DoD compliance requirements and can fund your pre-delivery needs while you’re secured into government contracts.
| Feature | Accord Financial | Why It Matters |
|---|---|---|
| Asset Focus | AR, Inventory, Equipment | Accelerates approval for growing firms |
| CMMC Ready | Compliance-aware structures | Reduces security risk exposure |
| Quickness | Weeks, not months | You capture contracts more rapidly |
Your growth won’t stall waiting for receivables anymore.
How To Qualify For Defense-Specific PO Financing In 2026
Ever wonder why some defense contractors seem to land massive contracts without breaking a sweat, while others struggle with the financial demands?
The secret’s straightforward: you’ve got to demonstrate you’re investment-ready. Here’s what lenders scrutinize in 2026:
- Performance history – Your track record of meeting government specs matters most. Lenders fund contractors who’ve consistently delivered in-time, especially those with active security clearances and CMMC compliance.
- Purchase order authenticity – You’ll need signed, legitimate POs from prime contractors or direct government agencies. These documents are your financial passport.
- Production capacity alignment – Show you’ve invested in operational improvements and can scale production. New DoD rules demand contractors prioritize U.S. government contracts over stock buybacks, so lenders reward facilities ready to grow.
Simply put, prove you’re serious about the mission, and capital follows. Utilizing fixed rate financing can also provide predictable payment terms crucial for managing defense project budgets effectively.
Conclusion: Strengthening The National Industrial Base With Strategic Capital
The convergence from surging defense budgets, reshoring momentum, and CMMC-driven supply chain consolidation has created both urgency and opportunity for contractors willing to act now.
You’re not just competing for contracts—you’re filling a genuine national need. With $113 billion in FY2026 weapons spending and 33,000 to 44,000 companies potentially exiting the industrial base, your capital-backed reliability becomes your competitive edge.
PO financing lets you scale without sacrificing ownership, keeping you nimble enough to capitalize upon this historic reindustrialization wave. The lenders understand your mission because they’ve funded others like you.
Your next move isn’t complicated: secure your capital, lock in your delivery schedule, and position yourself as the dependable supplier primes desperately need right now. This means preparing thorough financial documentation to streamline your funding qualification and approval process.
Frequently Asked Questions
Does PO Financing Require Personal Guarantees or Collateral Beyond the Purchase Order?
You won’t need personal guarantees with PO financing. Lenders evaluate your customer’s creditworthiness and your purchase order itself—that’s your collateralAn asset pledged by a borrower to secure a loan, subject to. You’re securing capital grounded in transaction strength, not your balance sheetA financial statement summarizing a company's assets, liabil.
How Quickly Can Capital Be Deployed After Submitting Documentation to a PO Lender?
You’ll typically access capital within 15-30 periods post-submission, depending upon your lender’s documentation standards. Private PO lenders often move more quickly than government programs, getting you funded when your mission can’t wait.
What Happens to My Company if a Government Customer Delays or Cancels Orders?
You’ll face cash flowThe net amount of cash moving in and out of a business. interruption and potential supplier defaults if delays occur. PO lenders typically require order cancellation insurance or contractual protections. You’re responsible for mitigating risk through backup clients and diversified revenue streams.
Can PO Financing Cover Indirect Costs Like CMMC Compliance and Security Infrastructure Investments?
You can’t directly finance indirect costs like CMMC compliance through PO financing, but you’ll utilize your purchase orders to free up working capital that covers these security investments across your entire operation.
Are There Penalties or Restrictions on Using Multiple PO Lenders Simultaneously for Different Contracts?
You can utilize multiple PO lenders for different contracts without federal restrictions, but you’ll need transparent disclosure for each lender and careful assignment structuring in order to avoid conflicts. State regulations vary, so verify compliance locally.
Gerry's commitment to helping businesses thrive is evident in his track record of providing tailored financial guidance. He understands the unique challenges that companies face and is dedicated to finding innovative solutions to support their growth.
When he's not working with clients or exploring the dynamic world of business financing, Gerry enjoys staying updated with industry trends and sharing his insights through informative articles. His passion for empowering businesses with financial knowledge is a driving force behind his work.
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