PO Financing vs. Equity: Which Dollar Actually Costs More?

Every dollar of capital has a price. PO financing charges a monthly fee you can see on a term sheet. Equity charges a percentage of every future dollar your company earns, forever. For CPG brands filling confirmed retail orders, the question is not which option costs less in a vacuum. It is which dollar costs less for this specific use: funding production on a confirmed purchase order.

The answer, for most growing brands, favors PO financing by a wide margin. Here is why.

The Cost Comparison Most Founders Get Wrong

Founders tend to compare PO financing fees against the interest rate on a credit line or the stated terms of an equity round. That comparison misses the point.

PO financing is transaction-level capital. It funds a specific purchase order, gets repaid when the retailer pays, and disappears. Equity is permanent capital. Once you sell a share of your company to fund a production run, that share is gone from every future revenue dollar, every future valuation increase, and every exit scenario.

The real comparison is not PO financing versus your cheapest existing facility. It is PO financing versus the next available dollar you would use to fill the order. For many growing brands, that next dollar is equity proceeds or operating cash raised through dilutive rounds.

What PO Financing Actually Costs

Purchase order financing fees typically range from 1.8% to 6% per month of the funded amount, according to industry pricing data compiled by Crestmont Capital. The exact rate depends on order size, buyer creditworthiness, your margins, and the length of the transaction cycle.

Here is a worked example. Say you receive a $200,000 Walmart PO and your cost of goods sold (COGS) is $120,000. A PO lender funds that $120,000 directly to your supplier. If the fee is 2.5% per month and Walmart pays in 60 days, your total financing cost is:

• $120,000 × 2.5% × 2 months = $6,000

That $6,000 is a known, one-time expense tied to this order. You fulfill the PO, Walmart pays, the lender is repaid, and the transaction ends. No ongoing obligations, no ownership changes, no board seats.

On an annualized basis, 2.5% per month translates to roughly 30% APR. That number looks aggressive in isolation. But annualizing a 60-day transaction distorts the picture the same way annualizing a $30 hotel-cancellation fee would make it look like a mortgage payment. The fee applies only for the duration of the transaction, not a full year.

What Equity Actually Costs

Equity has no interest rate and no monthly payment. That makes it feel free. It is not.

When you sell equity, you permanently reduce your ownership stake and your claim on all future profits. The cost becomes visible only later, when the company is worth more than it was at the time of the raise.

According to Carta's 2025 Founder Ownership Report, the median founding team owns 56.2% of their company after a seed round. By Series A, that drops to 36.1%. By Series B, 23%.

Each round dilutes the founders further. Carta's State of Private Markets report for Q4 2025 found that median dilution across seed through Series C rounds fell to about 16% per round, continuing a multi-year trend. Even at these lower rates, the compounding effect is substantial.

Liam Fairbairn, Director of Startup Banking at Silicon Valley Bank, summarized it plainly: "The money you raise early on will be the most expensive money you ever take."

The hidden costs beyond dilution

Equity costs extend beyond the ownership math:

• Control: Investors often receive board seats, veto rights over certain decisions, and protective provisions. Selling equity to fund production is trading strategic flexibility for inventory execution.

• Future fundraising: Each dilutive round resets your ownership baseline. Capital raised later cannot undo dilution from earlier rounds.

• Exit economics: One analysis showed that raising $1.5 million at a $3 million valuation cost a founder $4 million more in ownership value at exit compared to using non-dilutive debt.

• Tax treatment: Interest payments on debt are tax-deductible. Equity dividends and profit distributions are not.

Side-by-Side: $200,000 Walmart PO, Two Ways to Fund It

The following table compares funding $120,000 in production costs (COGS on a $200,000 Walmart PO) using PO financing versus equity capital.

The $6,000 PO financing fee reduces gross margin on this order from, say, 40% to 37%. The order is still profitable. The equity capital stays available for the purposes it was raised for: building the brand, expanding distribution, hiring, and funding operations.

Using equity to fund production instead means $120,000 of capital raised at significant dilution goes toward a routine operational expense rather than growth. That decision compounds: every dollar of equity spent on production is a dollar that must be re-raised later, at further dilution, to fund the growth it was originally intended for.

When Each Type of Capital Fits

PO financing and equity are not interchangeable. They solve different problems at different stages.

PO financing fits when

• You hold a confirmed order from a creditworthy retailer like Walmart or Sam's Club

• Your gross margins are strong enough (typically 20%+) to absorb the financing fee and still profit on the order

• You need capital specifically for supplier payments and production costs before the retailer pays

• You want to preserve equity and operating cash for growth

• You do not yet qualify for a traditional credit line, or your existing facility does not cover this order's size

Equity fits when

• You need capital for activities that do not generate near-term receivables (brand building, R&D, team expansion)

• The business is pre-revenue or pre-product, with no confirmed orders to collateralize

• You need patient capital with no fixed repayment timeline

• Strategic value from the investor (network, expertise, retail relationships) justifies the dilution

The distinction matters: equity is growth capital. PO financing is execution capital for confirmed orders. Using growth capital for execution is a capital allocation error that compounds over time.

How Bridge Structures PO Financing for Walmart Suppliers

Bridge is the direct lender for Walmart-focused purchase order financing. We fund approved PO costs tied to Walmart and Sam's Club supplier transactions, covering up to 100% of COGS on approved deals.

Here is what the process looks like:

1. Share your purchase order. Upload your confirmed Walmart PO along with supplier details and margin information.

2. We underwrite the transaction. Bridge evaluates buyer creditworthiness, supplier credibility, your margins, and the fulfillment plan, not just your credit history.

3. Funds go to your supplier. Once approved, Bridge pays your supplier or co-packer directly so production starts without draining your cash.

4. Walmart pays, Bridge is repaid. When Walmart remits payment on the invoice, the financing is settled. No ongoing obligations remain.

The result: your equity stays intact, your operating cash stays flexible, and the order gets filled on schedule. For brands that want to compare PO financing against other working capital structures, Bridge provides standardized term sheets that break down total cost of capital across the full order cycle.

Request financing to see if your Walmart PO qualifies.

FAQs

Is PO financing cheaper than giving up equity?

• On a per-transaction basis, almost always. PO financing fees are a one-time cost tied to a specific order. Equity dilution compounds across all future revenue and exit value. If a 2.5% monthly fee on a 60-day order costs $6,000 but preserves $120,000 of equity capital for growth, the math favors PO financing for production funding.

Can I use PO financing if I already have investors?

• Yes. PO financing does not conflict with existing equity investors. Many equity-backed brands use PO financing specifically to preserve investor capital for growth rather than spending it on routine production. The debt sits at the transaction level, not the corporate level.

What if my margins are too thin to absorb PO financing fees?

• Margins matter. If your gross margin on the order is below 20%, PO financing fees may consume too much profit to justify the transaction. Bridge evaluates margins during underwriting to ensure the deal makes financial sense for both sides. In some cases, renegotiating supplier costs or retail pricing before seeking financing is the better first step.

Does PO financing affect my ability to raise equity later?

• It should not. PO financing is short-term, transaction-specific debt that clears when the retailer pays. It does not create long-term liabilities or restrictive covenants that would concern equity investors. In fact, using PO financing to preserve cash can make the next equity round more favorable by extending your runway and demonstrating capital discipline.

How does Bridge's PO financing compare to early payment programs from Walmart?

• They solve different timing problems. Walmart's early payment programs accelerate cash after goods are delivered and invoiced. They do not fund the production and supplier costs that arise before fulfillment. Bridge covers the pre-delivery gap: paying suppliers, funding production, and getting goods manufactured and shipped before the payment clock starts.