There are several business financing options to consider to help you remain liquid in your manufacturing business.
What You Need to Know About Manufacturing Business Loans
There are both benefits and drawbacks you need to consider before applying for a small business loan for your manufacturing business.
- Low interest rate
- Predictable monthly payments
- Great for building credit
- May require collateral
- May require high credit scores
- Interest rates vary depending on your qualifications
Manufacturing Business Loans Pros
Having cash when you need it could be the difference between your business struggling and thriving.
Low Interest Rate
Compared to other financing tools like a business credit card, a manufacturing business loan, particularly one backed by the SBA, can have a low interest rate.
Predictable Monthly Payments
Knowing how much your monthly loan payment is helps you better budget for your business expenses.
Great for Building Credit
Even if your credit history is bare or you don’t have high credit scores, taking out a manufacturing business loan can help you build them up, assuming you pay your monthly bill on time. This will help you qualify for better financing terms down the road.
Manufacturing Business Loans Cons
There are two sides to every coin. Here are other things to consider before applying for a loan.
May Require Collateral
Depending on your how risky a lender sees you as being, you may need to put up collateral against the loan. That could be manufacturing equipment you use in your business, real estate, or cash.
May Require High Credit Scores
If you are a risk, some lenders may higher credit score requirements than others. Your score may directly impact the rate you are offered.
Interest Rates Vary
As mentioned above, if you don’t have high credit scores, you may not qualify for the best financing rates. This can increase your cost of a loan.
What is a Manufacturing Business Loan?
A manufacturing business loan gives you capital to purchase manufacturing equipment, cover operating expenses, or expand your business. Essentially, any expenses that are involved in operating a manufacturing business can be covered by this loan.
Manufacturing Business Loan Companies
With a constant demand for labor (especially when orders rise), technology that constantly needs to be replaced to keep you competitive, and increasing materials costs, manufacturing businesses often struggle with cash flow. Here are companies that can help.
How Does a Manufacturing Business Loan Work?
Once you determine your need for capital in your manufacturing business, you can apply for one of several types of manufacturing loans (more on those shortly). The lender will assess your risk level to determine whether you qualify, and if so, at what rate.
You will be given a lump sum and a repayment plan, including interest fees.
How to Qualify for a Manufacturing Business Loan
Lenders look at several factors to determine whether you qualify for a loan, and these factors can vary from lender to lender. Generally, you will need to have:
- 3+ months in business
- $10,000 monthly revenue ($120,000 annual)
- Credit scores of 450+
Best Uses for a Manufacturing Business Loan
Here are a few examples of when having a manufacturing business loan can come in handy.
- You just had a client place a large order and need capital to cover supplies before the client pays its invoice
- You need to replace outdated manufacturing equipment
- You are looking to expand your business
Alternatives to Manufacturing Business Loans
Consider all your options when it comes to financing your manufacturing business.
SBA loans offer low rates and long repayment terms, and there are several types of SBA loans with different requirements and cap amounts, so find the one that suits your needs.
Another option is to go straight to your bank for financing. Bank loans can offer great rates, but know that the approval process can take a while. Best if you have time to wait.
Line of Credit
If you know you’ll need funds over time and not all at once, a line of credit allows you to take out the amount you need when you need it, up to a set amount.
If you are specifically looking for money to buy or lease a piece of manufacturing equipment, know that there are specific equipment loans for that purpose. The equipment you’re purchasing is the collateral for the loan, which means you’re more likely to get a low interest rate.
Nav’s Verdict: Manufacturing Business Loan
If having an injection of cash is what you need to boost your manufacturing business, financing could be a smart move. Just know what you want to use the money for and get a plan for paying it off.
- SBA Loans
- Traditional Bank Loans
- Merchant Cash Advance
- Micro Loans
- Cash Flow Loans
- Alternative Online Loans
- Construction Business Loans
- Retail Business Loans
- Restaurant Financing Options
- SBA 7(a) Loans
- SBA Express Loans