Over the past year, I’ve been checking out multiple factories. Different geographies, different specialties, different customer sets. The same issue is coming up every time.
It shows up in day-to-day decisions.
- Can we take this order?
- Can we afford the material?
- Do we have enough cash to get through the next six weeks
The primary production constraint is access to working capital.
Net Terms are Creating a Constant Squeeze
Most shops operate on net 30, 60, or sometimes over 90-day terms.
Costs do not wait:
- Materials need tobe paid upfront
- Labor is paid weekly or biweekly
- Overhead runs continuously, regardless of output
- Tooling and setup happen before parts ship
Cash arrives later.
Each job requires the shop to bear the cost of production until payment is received. Small manufacturers end up financing much larger customers.
This Shows Up Across Every Shop
This pattern holds across different types of factories.
- In precision machining shops, material purchases are the pressure point.
- In fabrication shops, labor and rework risk build before invoicing.
- In more complex assemblies, long lead components tie up cash early.
The details vary, but the outcome is consistent.
As a result, shops hesitate on good work because they are managing cash exposure alongside execution. Or, worse, they delay current production timelines and squeeze their own vendor base, causing even more problems down the road.
Strong Customers Still Create Pressure
‘Tier 1’ customers (think SpaceX, U.S. Navy, Lockheed) bring steady demand and credible programs.
However, actually fulfilling these orders often requires:
- Large upfront material purchases
- Several weeks of labor before invoicing
- Additional setup or tooling costs
If payment is made 60 days or more after the product has shipped/a milestone has been achieved, the supplier has to navigate considerable cash flow hurdles.
Why Good Shops Turn Down Good Work
Across multiple factories, similar decisions repeat.
- Shops pass on orders they know they can execute well.
- They delay starting jobs until cash is available.
- They prioritize customers with faster payment cycles.
- They extend payment terms with their own vendor base.
A delayed payment can create real strain, so shops manage exposure carefully.
Why OEMs Struggle to Find Vendors
“I can’t find a good vendor.”
From the outside, this appears as a supply issue. OEMs and primes report difficulty finding reliable suppliers. Lead times stretch. Performance varies.
In many cases, capable suppliers are available, but the limiting factor is their ability to cover the production cost at the required scale.
Smaller shops tend to be faster and more responsive but operate with tighter cash buffers. Larger suppliers can absorb longer payment cycles but often move with more inertia.
This Is a Financing Constraint
Operational improvements help, but they do not change the timing of cash.
Planning tools, automation, and process improvements increase efficiency. They do not remove the need to fund production between order and payment.
When working capital is tight, growth is gated by cash flow.
A More Direct Solution
A better approach to invoice factoring would address this directly.
If a shop is producing for a credible customer, it should be able to access capital tied to that work.
A more effective model would:
- Evaluate the credit of the end customer
- Provide capital at delivery or at defined milestones
- Reduce the delay between shipment and payment
- Align pricing with the risk profile of the customer
If the end customer is SpaceX, the credit quality is clear. Financing can be structured accordingly.
What This Unlocks in Practice
If payment timing improves:
- Shops can take on larger and more consistent orders
- Production planning becomes more stable
- Customer selection aligns with long-term value rather than payment speed
This leads to better utilization of existing capacity.
This comes up in every factory I have spent time in – it is clearly shaping which jobs get accepted, how production is scheduled, and how quickly shops can grow.
Working capital sits at the center of those decisions.
Shortening the gap between completing work and receiving payment would unlock a meaningful amount of capacity that already exists today.
Reducing the capital constraint is mission-critical to actually re-industrializing America and expanding production capacity across the industrial base.
George Payne 