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How Bengal Origin Co. vets factories financially — our full protocol, published

Most buying houses do not publish their factory vetting criteria. I understand why — it is uncomfortable to be held to a documented standard. But accountability requires specificity. If we claim to vet factories to a higher standard than the industry norm, we should be willing to show exactly what that means.

This article describes the financial vetting protocol we use at Bengal Origin Co. — every step, every document, every threshold. Buyers who work with us can hold us to it. Buyers evaluating us can compare it to what their current agent does.

Why financial vetting exists separately from compliance auditing

Compliance audits and financial health assessments measure different things. A BSCI audit assesses whether a factory meets labour and ethics standards — fair wages, safe working conditions, no child labour, no forced labour. These are essential baseline requirements, and every factory in our network holds current compliance documentation.

A financial health assessment asks a different question entirely: can this factory fund and complete your order? A factory can score perfectly on every BSCI criterion and still collapse mid-production if its bank withdraws credit. We know this because it happened to us in 2022.

We run both assessments independently. Compliance audits are a condition of network entry. Financial vetting is an ongoing monitoring protocol that continues for as long as a factory is active in our network. Both matter. Neither substitutes for the other.

The onboarding assessment

Before any factory enters the Bengal Origin Co. network — before we present it to any European buyer — it must pass a six-point financial health assessment. These are not optional. A factory that cannot satisfy all six is not presented, regardless of how good its product quality or pricing may be.

Bank solvency certificate. We require a formal bank solvency certificate dated within three months of onboarding. This document, issued by the factory's commercial bank, confirms that the factory has an active working capital facility. It does not disclose the facility amount — that is confidential between the factory and its bank. But it confirms the fundamental requirement: this factory has access to the credit it needs to purchase raw materials for your order. A factory without an active facility cannot open back-to-back letters of credit and cannot procure fabric. It cannot complete your order.

Trade reference check. We require a minimum of two buyer references willing to confirm that the factory has completed orders on time within the past twelve months. Specifically, we ask references to confirm that payment relationships are current — that the factory is not carrying outstanding disputes or unresolved quality claims with other buyers. A factory that cannot provide two current references either has very few buyers or has relationships it does not want us to examine.

Utility payment status. We verify that electricity and gas accounts are current. This may seem like a minor detail, but it is one of the most reliable early warning indicators in Bangladesh factory assessment. Factories under financial stress frequently fall behind on utility payments before they fall behind on orders. Utility providers in Bangladesh are more tolerant of delayed payment than fabric suppliers or banks, so utilities are the first obligation that slips when cash flow tightens. A factory current on utilities is not necessarily healthy — but a factory behind on utilities is almost certainly under pressure.

Worker wage payment record. We request confirmation of wage payment dates for the past three months from factory HR. We are not checking whether the wage rate meets minimum standards — that is a compliance audit matter. We are checking whether wages are being paid on time. In a healthy factory, wages are paid on or around the 7th of the month. A pattern of payments shifting to the 15th or later signals deteriorating cash position. Consistent late payment is a disqualifying indicator.

Order book utilisation. We ask about current production capacity commitment. Our threshold is 60-85% as the healthy operating range. Below 40% suggests a factory that is not covering its fixed costs — staff salaries, utility bills, loan repayments. A factory at this utilisation level faces pressure to accept any available work, including work that may strain its ability to deliver existing commitments. Above 95% signals a factory that has no production buffer for the normal variability of garment manufacturing — a fabric defect requiring re-cutting, a wash test failure, a public holiday affecting output. A factory at 95%+ utilisation will compress your timeline to accommodate competing priorities.

Subcontracting history. We ask directly whether the factory has ever subcontracted production without buyer disclosure. We cross-reference this with available references. A history of undisclosed subcontracting disqualifies a factory from our network regardless of how strong its other indicators may be. This is a non-negotiable threshold. If a factory has subcontracted without disclosure in the past, it will do so again under financial pressure. The pattern is consistent enough that we treat it as a structural disqualification, not a judgement call.

The traffic light monitoring system

After onboarding, every factory in our active network is monitored quarterly against the same indicators. We use a three-level classification system that defines exactly what happens at each level.

Green. All indicators current. No changes from previous quarter. Utilisation within the 60-85% healthy range. Bank solvency certificate current. Wage payments on schedule. Standard quarterly monitoring continues. No action required.

Amber. Any single indicator moves outside its defined threshold. This includes: wage payment timing shifting by more than five days, utilisation moving above 90% or below 45%, a reference reporting a delivery delay or quality dispute, or any change in factory ownership or senior management. Within 48 hours of an amber signal, we contact the factory owner or managing director directly for a written status update. No new orders are placed with an amber-status factory until the indicator is resolved and documented. Existing orders continue with increased monitoring — we move from quarterly to monthly checks on the affected indicator.

Red. Two or more indicators outside threshold simultaneously, or any severe single indicator: confirmed wage arrears exceeding two weeks, bank relationship change or credit facility reduction, undisclosed subcontracting on any order, or factory management unable or unwilling to provide a written status update within the 48-hour amber window. At red status, we notify the relevant European buyer immediately with a written risk assessment. We evaluate backup factory activation. The factory remains in our network database but is suspended from receiving new orders until all red indicators are resolved, documented, and independently verified.

The 40/95 utilisation rule

Our utilisation thresholds deserve specific explanation because they are counterintuitive. Most buyers assume that a busy factory is a good factory. In practice, there is a narrow band of utilisation that correlates with reliable delivery.

A factory below 40% utilisation is not covering its fixed costs. Staff, utilities, loan repayments, and overheads continue regardless of how many production lines are running. At this level, factory management faces pressure to take any available work — including orders with specifications they are not well-suited to, timelines they cannot realistically meet, or pricing that does not cover their costs. A factory desperate for work is a factory that will overpromise and underdeliver.

A factory above 95% utilisation has no buffer for the production variability that is normal in garment manufacturing. A fabric defect discovered during cutting, a wash test failure requiring re-processing, a public holiday weekend, a key machine breakdown — any of these events, routine in isolation, creates a cascade of delays across all orders when the factory has no spare capacity. Your order timeline is compressed to accommodate the disruption, and you learn about it when the delivery date slips.

The 60-85% range gives a factory enough work to cover its costs and maintain operational efficiency, while retaining enough buffer to absorb the normal disruptions that occur in any production cycle.

The backup factory protocol

For every active client order above a defined value threshold, we designate a backup factory. This factory is pre-briefed on the order specifications, with capacity confirmed for the relevant production timeline, and technically capable of the product category. The backup factory knows that it may be called upon to absorb an order at short notice — though it does not know which specific client or order it is backing up.

This protocol has never been activated since 2022. That is the point of having it. A factory financing collapse takes between 48 and 72 hours to become visible once it begins. A backup factory that has been briefed and capacity-confirmed can absorb an order in that window. A backup factory that has never been identified cannot.

What we do not do — and why

We do not conduct formal credit scoring or credit rating assessments. Bangladesh credit bureau infrastructure is not at a level that makes formal scoring reliable for mid-tier factories. The bank solvency certificate and our direct monitoring indicators provide more actionable information than a credit score would in this market context.

We do not rely on reputation or relationship history as a substitute for current documentation. The factory in 2022 had a multi-year track record with us. Track record tells you about the past. Bank solvency certificates tell you about now. We learned this distinction at cost.

We do not share individual factory financial information with other buyers or agents. The vetting records are used solely for our own risk assessment and for disclosure to the specific buyer whose order the factory is being presented for. Factory financial information is commercially sensitive, and we treat it with the same confidentiality we would expect for our own.

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We publish this protocol because we believe buyers deserve to know what "financial vetting" means before they accept a buying house's claim to do it. If you would like to see the actual documentation format we use for any of these assessments, I am happy to share it on request.