A defence supplier that wins an order and is paid an advance would seem to have solved its financing problem before production begins. But a customer that pays in advance may want security for its money. It can ask for a guarantee that the advance will be repaid if the supplier fails to perform, and for further guarantees that the bid is serious, that the contract will be executed and that defects will be remedied during the warranty period. Those instruments are issued not by the supplier but by a bank or an insurer, which will want to be sure that it can recover whatever it pays out. If the issuer asks for cash as collateral, the advance that was meant to buy components and pay wages can end up sitting in a pledged account. A supplier can therefore hold a signed contract, a willing customer and money in the bank, and still be unable to use that money to build what it has sold. As European governments place more and larger orders, this mechanism matters for primes and small firms alike, yet it is rarely visible in the figures through which the industry’s capacity is usually judged: order books, revenue, borrowing and equity. The question is when the obligation to provide contract guarantees takes liquidity away from a defence supplier, and how that risk is shared among the supplier, the issuing bank, the state and the group to which the supplier belongs.