What is Work-in-Process Financing? How Does it Work?

Work-in-process (WIP) financing is a type of funding that helps cover the supplier expenses of companies that manufacture or assemble goods. It is also known as production financing.

1. What problem does it solve?

Companies that manufacture or assemble goods often have a difficult time getting financing. And when they do get financing, the solution is usually inflexible. This situation often leaves companies unprepared to capitalize on certain opportunities.

Work-in-process financing solves this problem. It provides a platform that allows you to purchase the materials you need to operate your manufacturing/assembly line. In turn, this purchasing power enables you to fulfill orders, build inventory, and grow the business.

We offer WIP financing through our supplier financing product.

2. How does work-in-progress financing work?

Supplier financing is a simple solution. A financing company intermediates purchases between your company and its suppliers. Whenever you need to buy product from your suppliers, you place an order with the finance company. The finance company provides you with trade credit and places a corresponding order with your supplier.

Your supplier manufactures and delivers the raw materials (or products) that you need. The finance company pays the supplier and then sends an invoice to you. Your company pays that invoice at maturity. For more information, read “What is Supplier Financing?”

3. WIP financing works well with other types of financing

Supplier financing can be used as a stand-alone solution or in combination with other financing products. Since it is not a line of credit, there is no requirement to file a lien against any of your company’s collateral. This facility does not interfere with other forms of financing. However, you need to check your covenants with your lender to ensure compliance.

4. Advantages of supplier financing

Supplier financing has a number of advantages as a WIP financing solution. First and foremost, it is not tied to any specific purchase order. The solution does not depend on your inventory being pre-sold or on a customer who has a specific creditworthiness. As a result, you are free to use it to fulfill any order or to build inventory.

Additionally, supplier financing is a selective facility. As such, you use it only when you need it. Lastly, most WIP financing solutions require you to disclose their use to your customers. This requirement can make these solutions cumbersome to work with. Supplier financing is different. It is invisible to your clients.

5. Who qualifies for WIP financing?

This solution is available to small and midsize companies that meet our qualification criteria. To qualify, your company must:

  • Be a manufacturer or product supplier
  • Have at least two million dollars in annual revenue
  • Provide accurate financial statements
  • Have at least three years of operations history
  • Have existing relationships with suppliers
  • Be credit insurable by Euler Hermes
  • Have product liability insurance

Keep in mind these are the minimum qualification requirements. Learn more about the qualification requirements.

Looking for work-in-process financing?

We are a leading provider of work-in-process financing. For a quote and a consultation, fill out this form.