Technically, they are the same. However, for our purposes, we are differentiating based on the structure of the PO/Contract. We are considering contracts with customized products/services or a lifespan longer than six months to require "Contract Financing". This is because these contracts are analyzed differently and may include milestone payments over an extended period of time.
As always, having a reputable buyer is a great starting point. However, it is not sufficient to demonstrate the strength of a contract. Therefore, you must demonstrate a full understanding of the terms and conditions of your contract prior to pursuing financing.
Financial History will allow us to assess the strength of your company, and your ability to repay a loan. The underwriting process will focus on the assets of the company, rather than solely a personal guarantee based on your Personal Net Worth.
When a contract has an extended life span (over 6 months), it is important to clearly demonstrate the cash flow requirements throughout the contract. When will you need the money, and for how long?
Proving your ability to deliver on the requirements of a contract will be crucial. The easiest way is to have previously delivered a contract with this product/service. This demonstrates that your product/service is proven and that your company is able to deliver.
If this contract is much larger than your previous contracts, your company will need to explain how you will scale-up your capabilities to deliver.
Bolster Growth Capital can help you assess some of the potential risks, and we will recommend risk mitigation solutions that will help you get financed.
If you'd like to have an exploratory call to discuss your options, please contact us at email@example.com. We look forward to helping you!
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