Manufacturing cash cycle
A large purchase order is good news that arrives with a bill. Here is how to count the days between paying for raw materials and getting paid, size the gap honestly, and pick the cheapest product that covers it.
✓ Checking what you qualify for does not affect your credit score.
Updated October 13, 2026 · Merchant Fund Express
When a purchase order requires you to buy raw materials and pay production labor weeks before the customer pays, you have a cash cycle gap. Count the days from the first material payment to the day the customer’s payment lands, add up what goes out in that window, and subtract the cash you can spare without starving normal operations. That remainder is the amount to fund.
Working capital fits when the order is profitable after funding costs and your regular business can carry the payments until the customer pays. It does not fit when the margin on the order is thin, when the customer is new and unproven on payment, or when the payments would pull from the same cash that runs your everyday jobs.
Take a metal fabrication shop with $140,000 a month in normal deposits that accepts a $186,000 purchase order from a distributor on net-45 terms. Materials cost $62,000, half with the order and half on delivery. Production adds $38,000 of labor over five weeks.
| Date | Event | Cash cycle day |
|---|---|---|
| Oct 23, 2026 | Pay 50% materials deposit | Day 0 |
| Nov 2 | Materials arrive; pay balance | Day 10 |
| Nov 6 to Dec 4 | Five weekly production payrolls | Days 14 to 42 |
| Dec 7 | Ship and invoice, net 45 | Day 45 |
| Jan 21, 2027 | Customer pays $186,000 | Day 90 |
In cash conversion cycle terms: about 35 days of materials in production, 45 days of receivables, and 10 days where you paid before the goods even arrived, for 90 days of cash out before cash in.
All figures in worked examples are illustrations of the arithmetic, not offers or quotes. Real terms depend on your file and the funder.
Cash going out before January 21 is $62,000 of materials plus $38,000 of labor, or $100,000. The shop can spare $35,000 without touching normal payroll, so it funds $75,000. Assume an illustrative factor of 1.28 and a $2,250 fee: net proceeds $72,750, total repayment $96,000, in 24 weekly payments of $4,000 from Friday, October 30, 2026 through Friday, April 9, 2027.
The test most shops skip: 12 of those payments ($48,000) fall before the customer pays on January 21. They come out of normal weekly deposits of about $32,300, roughly 12% of each week. If your regular jobs cannot carry that for three months, the order is too large for this structure, however profitable it looks on paper.
All figures in worked examples are illustrations of the arithmetic, not offers or quotes. Real terms depend on your file and the funder.
| Option | Cost on this order | What it needs |
|---|---|---|
| Line of credit (first tier) | Draw $75,000 in stages; at an illustrative 1% a month, about 3 months of interest is roughly $2,250 | 3+ years, 650+ FICO, $25,000/month revenue |
| Revenue-based funding | $23,250 in the example; fixed weekly payments start right away | 6+ months, 600+ FICO, $60,000 verifiable revenue |
| Invoice factoring | Only starts Dec 7 when the invoice exists; does not cover materials | A creditworthy customer and a clean invoice |
| Purchase order financing | Usually built for resold finished goods, not goods you manufacture | Supplier and customer both verified |
| Supplier terms | Free if the supplier gives net-30 on materials | Ask before you borrow |
If the file clears our first tier, the line is the clear winner: you repay it the day the customer pays. Many shops combine a smaller advance for materials with invoice factoring after shipment. Read purchase order financing and trade credit before assuming PO financing fits a manufacturer.
No tax returns for a typical first review; full financials usually only above $250,000. For related shop pages, see machine shop big-contract funding and equipment financing for a machine shop.
Write out your five dates, from first material payment to customer payment, and run the payment test against your normal weekly deposits. If the order clears both tests, apply with the PO and your statements. Complete files get a same-day decision.
Count the days from your first payment for materials to the day the customer’s payment lands. In the example it is 90 days: 10 days of prepayment, 35 days of production, and 45 days of terms.
The purchase order supports the request, but the review is based on your bank statements. A strong PO with a weak account history usually needs a smaller amount or a customer deposit.
It can be, but it only starts once you ship and invoice. It does nothing for the materials and labor weeks, which is where most of the gap sits.
Your payments continue regardless. Build in at least two extra weeks of payments from normal deposits and confirm the customer’s payment history before accepting a large order on terms.
Requests run from $25,000 to $5 million. Above $250,000, full financials are usually requested.
Same-day decision. Applying takes a few minutes and will not affect your credit score.
