WIP (Work-in-Progress) financing is a method of financing whereby a manufacturer obtains the working capital needed to complete the production cycle on pre-sold orders.
This financing is used to purchase component parts that are required to assemble a finished product. WIP financing is sometimes referred to as production financing or inventory financing.
Work-in-progress (WIP) refers to the phase of manufacturing where components are assembled into finished products. Even though these products may be pre-sold, they can’t be invoiced yet. So obtaining financing for this part of the production cycle can be challenging.
Through Spearfish, you may be able to obtain WIP financing. Here’s an example of how it works.
Let’s say you manufacture ambulances that are built on Ford Transit or Mercedes Benz Sprinter chassis.
- A WIP financer can use their credit to purchase the chassis for those pre-sold ambulances.
- Once the ambulances are delivered, and an invoice is generated, your invoice can be factored.
- You receive between 80%-90% of the total amount the customer owes you. The WIP financier is paid out of that.
- Once the customer pays their invoice in full you receive the remaining amount minus the small invoice factoring fee.