Contract Financing is provided to businesses that do not produce their own products, but rather contract out manufacture and fulfillment to another company, whether it is foreign or domestic.

Here’s how Contract Financing works:

You’ve received a valid Purchase Order from XYZ Company, a credit worthy customer, for 1,000 units @ $200.00/unit. You inform your manufacturer you will need 1,000 units delivered to XYZ Company by a certain date. They tell you they will need $100,000 to produce and deliver.

With Contract Financing in place, the money is provided by the investor, to have the product produced, insured and delivered to your customer. Typically, there will be an Accounts Receivable Financing relationship in place to “take out” (pay off) the contract financing once the product is delivered. This type of financing is also used for import and export.

Note: It is important to understand that this type of financing is not for inventory build up, but rather is for fulfillment only. Fees tend to be higher and advances lower then with regular Accounts Receivable Financing because of the greater risk to the investor.

Is Contract Financing right for your business, or is there a better solution to your cash flow needs?