Unless a company is “bankable”, it is challenging to find manufacturing or production financing to fund working capital during the pre-invoicing stage of production.
What is WIP?
Work in process (WIP) is the part of the inventory that is being “worked on” or has an aspect of “conversion” and is yet in the production process. Work in progress is the stage in between the raw material and finished goods.
It is no longer purely raw materials because it has undergone some conversion in the production process. It is not yet finished goods because more processing has to be done to put it or “asemble” into its end saleable condition meeting buyer requirements.
WIP includes the items that are being fabricated or waiting for further processing or held in storage.
Funders consider financing work in process if the client’s product is pre-sold to a robust corporate credit customer and the financier can get comfortable with the manufacturing processes.
The business is not buying a finished product from a third-party factory. They are instead purchasing various components, and either sending them to a manufacturer for assembly or assembling the product themself. In either case, the financier can buy the parts for the client to fulfil the orders.
Need help funding inventory? Ask Stak.
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Stak provides working capital to clients that sell to some of the largest buyers in Australia & overseas.