Manufacturing funding from raw materials to paid invoice

In depth

The cash cycle from PO to payment

A manufacturer's cash gap has 3 parts: how long materials sit before production, how long production takes, and how long the customer takes to pay after shipment. Add them up for a typical order and you have the length of the problem.

A line of credit or an asset-based line sized to that cycle fits better than a short advance, which starts debiting long before the order pays. Openbook Capital shows each offer's total payback, cost in dollars, payment schedule and estimated APR side by side, so you can see what carrying the cycle costs.

Growth makes the gap bigger, not smaller. Doubling your orders doubles the cash tied up in materials and receivables before any of it comes back, which is why a growing manufacturer can feel tighter on cash than a slow one.

Why PO funding rarely fits production

Purchase order financing is built for reselling: the funder pays your supplier for finished goods, the goods ship to your customer, and the funder is repaid when the customer pays. Manufacturing adds conversion risk, the chance that production runs late or misses spec, and many PO funders avoid it.

Once you've shipped and invoiced, invoice factoring can take over. An asset-based line can cover the whole cycle, lending against raw materials, finished goods and receivables in a borrowing base that updates as they change. If you outsource production entirely, PO financing may fit after all.

Tell any funder exactly what you'd buy, how long production runs and when the customer pays. A funder that understands the cycle can offer a structure that matches it, while one that doesn't tends to price for the uncertainty.

Financing machines without tying up the line

A CNC machine or press can earn money for many years. Equipment financing uses the machine as collateral and spreads payments over its working life, usually at a lower cost than unsecured funding. Ask about installation, rigging and tooling, which some lenders include and others don't. Machines with a strong resale market usually get better terms than custom equipment built for 1 line.

Equipment you already own can raise cash too, through a sale-leaseback or a loan against the machines, from some lenders. A sale-leaseback adds a payment, so compare its total cost like any other funding. Get an appraisal first, since the machine's value sets how much either option can raise. Our financing versus leasing guide compares the structures.