The risk is transferred away from the company to the contract manufacturer. The emphasis is then put upon the contract manufacturer’s ability to perform. Acceptable risk is always a contract manufacturer that has significant experience in the business of producing this product and sustain due diligence with references. In most cases, the contract manufacturer will require a deposit or assurance to get paid to begin production or payment to release goods. Since it’s a domestic contract manufacturer and verified through due diligence the ability to perform, this is a viable transaction even if the client is an early stage company or early stage company.
History with sales and use of the contract manufacturer is not a requirement but certainly helpful in evaluating the risk.