| Investopedia: "Work in Progress (Work in Process) is work that has not been completed but has already incurred a capital investment from the company. This is usually recorded as an asset on the balance sheet. Work in progress indicates any good that is not considered to be a final product, but must still be accounted for because funds have been invested toward its production." (credit: investopedia.com) |
There are two basic types of Purchase Order Funding, namely: (a) Funding Finished Products and (b) Funding Work-In-Process. Most of the Financiers in this business will only do Finished Products. STAR, however, will consider both.
STAR will consider funding Work-In-Process if the client is pre-sold to a credit approved customer, and STAR can get comfortable with the manufacturing process. The client is not buying a finished product. He is instead buying various components, and either sending them to a manufacturer for assembly, or assembling the product himself. In either case STAR can buy the components and have them shipped to the manufacturer. Whether the client or an unrelated company is the manufacturer, STAR will evaluate the ability of the manufacturer to produce a product is the right quantities, quality and in the right time-frame. This is a hands-on and extremely risky business, since STAR chances losing 100% of its investment if the product is never completed, or not completed in the right time frame, or is not of the right quality.
STAR uses the same financial and logistical skills for Work-In-Process financing as it does for Finished Goods. However, it is the manufacturing background of STAR'S principals that gives it the confidence to evaluate the production cycle and the ability of the manufacturer to produce the right product in a timely fashion.
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