Why do aerospace suppliers wait so long to get paid?
Aerospace suppliers wait because payment depends on acceptance, and acceptance in this industry is slow by design. Parts may need source inspection at your facility, first article inspection reports, certificates of conformance and material traceability before the customer will book the receipt. Only then does the 60 to 120 day payment clock start.
Large primes and tier-one manufacturers have also lengthened payment terms over the past decade and steer suppliers toward buyer-led early-pay programs. Those programs can be useful, but they cover only that buyer and the discount is set by the buyer’s bank. A small machine shop or special-process house with five aerospace customers needs a solution across all of them.
Add material lead times on titanium, Inconel and aerospace-grade aluminum, and a sub-tier supplier can be funding a part for six to nine months from raw material order to cash receipt.
When is an aerospace invoice eligible for factoring?
An aerospace invoice is typically eligible once parts have shipped, required inspection and documentation are complete, and the customer has accepted the delivery or the contractual acceptance period has passed. Funders do not advance on parts awaiting first article approval or sitting in a customer’s receiving inspection with open nonconformances.
Expect verification calls or portal checks against the customer’s supplier system to confirm receipt and acceptance. Keep a clean link between each invoice, its purchase order line, the packing slip and the certificate of conformance. Missing paperwork is the most common reason an aerospace invoice is held out of the borrowing base.
| Milestone | Typical factoring treatment |
|---|---|
| Order received, material on order | Not eligible for factoring; consider PO financing |
| Parts complete, awaiting source inspection | Not eligible |
| First article submitted, not yet approved | Not eligible for that lot |
| Shipped with C of C, in customer receiving | Eligible with some funders at a lower advance |
| Accepted by customer | Eligible at full advance |
| Rejected or in MRB disposition | Excluded until resolved |
What do DPAS-rated orders and AS9100 mean for underwriting?
A DPAS-rated order and AS9100 certification both signal to a funder that you are an established part of the defense and aerospace supply chain. Neither is a guarantee of payment, but both reduce perceived risk.
Under the Defense Priorities and Allocations System regulations at 15 CFR Part 700, rated orders carry a DO or DX priority, and suppliers are generally required to accept and give preference to them. For a funder, a rated order is evidence of program demand and a customer that will keep buying. AS9100, the aerospace quality management standard, tells the funder your inspection and traceability processes are documented, which lowers rejection and dilution risk.
Export-controlled work adds compliance diligence. If you handle ITAR-controlled technical data, the funder will want to confirm your registration status and will not need or ask to see controlled drawings. Defense contractors handling controlled unclassified information may also be asked about their cybersecurity compliance posture under DFARS clauses; describe it accurately and do not overstate certification status.
What documents do funders request from aerospace and defense suppliers?
Aerospace funders request standard factoring documents plus quality and program documentation that proves invoices will be accepted and paid.
- AR aging by customer, with prime or tier-one name and program where known
- Long-term agreements or purchase orders, including payment terms and acceptance language
- Sample invoice packets: PO, packing slip, certificate of conformance, proof of delivery and acceptance record
- AS9100 (or ISO 9001) certificate and most recent surveillance audit date
- Rejection, return and corrective action history for the past 12 months
- Backlog report and DPAS-rated order identification
- Export compliance status if ITAR or EAR controlled work is performed
- Existing lender documents, equipment lender UCCs and any SBA loans
Direct to the government or through a prime: what changes?
Most aerospace and defense suppliers sell to primes, tier-ones or distributors, which makes them commercial receivables factored under a standard UCC filing and notice. If you hold a contract directly with a federal agency, the funder will generally take an assignment under the Assignment of Claims Act, the same process covered on our government contractors page.
Mixed books are common: a supplier might sell 70% to primes and hold a small direct contract with a military depot. A good funder handles both under one facility.
How do aerospace suppliers fund materials before invoicing?
Factoring starts at acceptance, so materials and work in process need a separate answer. Options include supplier terms negotiated on the strength of a rated order, PO and inventory financing for large confirmed orders, and progress payments where your customer contract provides them.
Suppliers with larger receivable bases, roughly $3MM and up, often get better economics from an asset-based structure that includes inventory; see large AR facilities. Run your timeline through the cash gap calculator to see how many days of cash your longest program actually consumes.
Illustrative scenario
Special-process supplier waiting on first article approvals
A Florida heat-treat and plating supplier with $6 million in sales adds two new part families for a tier-one aerostructures customer on net 90 terms. First article approvals take four to six weeks, and $700,000 of receivables are tied up with a single customer.
- Facility of $1.2 million covering accepted invoices across all aerospace customers
- Advance of 85% on accepted invoices; shipped-but-unaccepted invoices excluded
- Concentration limit of 45% on the tier-one customer, with the excess advanced at a lower rate
- Funder verifies acceptance through the customer’s supplier portal before each advance
- Existing SBA lender subordinates its lien on factored receivables
Outcome: Once first articles are approved, the supplier converts net 90 receivables to cash within a few days of acceptance. The company stops turning down overflow work from its largest customer for lack of working capital.
A composite example for illustration, not a specific client, offer or promise of terms.
Questions people ask
What advance rate do aerospace suppliers get?
Aerospace and defense suppliers typically receive 75% to 90% of accepted invoice value. Strong primes and clean acceptance history support the upper range; concentration, rejections or long receiving cycles pull it lower.
Can I factor invoices before the customer accepts the parts?
Generally not at a full advance. Most funders wait for acceptance or for the contractual acceptance window to pass. A few will advance at a reduced rate on shipped invoices with complete paperwork.
Does AS9100 certification matter to a factor?
It helps. AS9100 shows that inspection, traceability and corrective action processes are documented, which lowers the risk of rejections and credits. It is not strictly required, but uncertified suppliers should expect closer diligence.
What is a DPAS-rated order?
It is an order carrying a DO or DX priority rating under the Defense Priorities and Allocations System, 15 CFR Part 700, which generally requires suppliers to accept and prioritize it. Funders view rated orders as evidence of steady defense demand.
Will factoring require me to share ITAR-controlled data?
No. Funders need invoices, purchase orders and acceptance records, not technical data. Keep controlled drawings out of the diligence package and tell the funder if documents need export-control handling.
Can I use factoring and a prime’s early-pay program together?
Often yes, but not on the same invoices. Invoices sold through a buyer’s program must be carved out of the factoring facility. Funders will ask which customers and invoices are already in such programs.