Why standard financing does not work
The contractor goes to their bank asking for collateral. The contractor may not have sufficient hard collateral so the bank looks at the balance sheet and sees a small company with lumpy revenue and limited retained earnings. The loan is declined.
But the bank is asking the wrong question when the contractor does not need to be creditworthy. The counterparty, i.e. the government ministry already is. The contract already specifies what will be paid, when, and under what conditions.
How the structure works
Contract-backed financing reframes the transaction. Instead of lending against the contractor's balance sheet, the financing is structured against the contract itself.
- WealthPot reviews the contract for finance-readiness using unique proprietary combinations of benchmarks such as counterparty creditworthiness, payment terms, assignment rights.
- If the contract qualifies, the receivables are assigned to a financing vehicle as security.
- A capital facility is advanced against the assigned receivables, typically 60–80% of the contract value.
- As the counterparty makes scheduled payments, those payments flow through a designated account to repay the facility.
- The surplus flows to the contractor.
What makes a contract finance-ready
Counterparty creditworthiness, defined payment terms and triggers, assignment rights, and balanced dispute and termination provisions are all key factors. WealthPot conducts a finance-readiness review before structuring any facility.