Bank Funding Against Forward Orders

[rfl]

Looking to a new line of business which will involve taking forward orders for product from companies/ individuals.

We will take a 10% deposit, plus contract to buy. Further deposit will be payable 6-9 mths later. Goods will be delivered after approx 12 mths.

Objective is to be able to get bank funding for part of the sales value of the product- lets say 15-25% of the sales value to help fund production costs.

Under normal circumstances where product delivered and invoiced we could look to invoice discounting company.

Obviously in this example the goods will not be delviered (though we could structure sales agreement to invoice full value of goods at point of sale, but defer final payment until delivery.

Anyone know of any banking/ funding products that might suit our situation? Anyone got any similar experiences?

[Billsnemesis]

Sounds like you are basically borrowing against work in progress. Although banks are known to do that (most law firms operate on that basis) it is generally by way of overdraft. That can be tricky because an overdraft can be called in at any time and that can kill a business if the timing is difficult.

If you were able to find some form of secured funding that might deter purchasers as they would be risking their 10% deposit against delivery. If your business goes belly up before they get delivery they will be unsecured creditors and will probably get nothing back.

If you can get around the "invoice now pay later" issue it might work but you will probably hit VAT issues as the trigger for VAT is the date of the invoice rather than the date of the payment.

What you are describing is really working capital and that means turning to venture capital or business angels rather than banks.