The manufacturing industry in the U.S. is expected to see modest gains over the next few years but there will be some challenges for manufacturers to overcome. In addition to focusing on maintaining their supply chain and their workforce due to ongoing labor shortages, manufacturing operations must ensure they keep up with advancements in technology, which have changed the industry significantly over the past five to 10 years.
Significant pressure could be placed on manufacturers over the next 12 to 18 months if economic growth overall slows down, which will make planning for potential variability in demand a key to success. Let’s look at one strategy to consider during the planning process: obtaining a manufacturing business loan.
What is a manufacturing business loan?
A manufacturing business loan provides working capital to purchase equipment, cover operating expenses or invest in expanding your business. There are no parameters as to what the funds may be spent on—essentially any expenses involved in operating the business can be supported by this type of loan.
How can your manufacturing business benefit from securing a business loan?
There are any number of reasons why your business might consider securing a manufacturing business loan, including:
- You just had a client place a large order and need funding to cover supplies before the client pays its invoice.
- You need to replace outdated manufacturing equipment.
- You are looking to expand your business and create more manufacturing jobs.
- You need cash flow during slow seasons.
You will need to share your business operations with a potential lender and that will include noting what you plan to use the funds for. Perhaps you wish to benefit by:
- Purchasing, building or renovating your office or warehouse
- Investing in new technology to produce your goods as well as track, ship and store them
- Adding furnishings, fixtures and lighting to office spaces
- Hiring, training and retaining skilled employees
- Securing sufficient working capital to enable you to bid on larger products
- Putting money into marketing to reach more potential customers
How do you qualify for a manufacturing business loan?
While every lender will have different qualifications, you should be prepared to meet their minimum requirements in the following areas:
- Time in business (often at least six months)
- Annual growth revenue (may be $180K+)
- FICO score (perhaps 500+)
In addition, most lenders will require that you have a business checking account, you are a U.S. citizen and your company is based in the U.S., you don’t have other financing and you have no open bankruptcies.
What other types of loans might you consider?
In addition to trying to secure a manufacturing business loan, commonly referred to as a term loan, you may also want to consider the following other types of loans to support your manufacturing business:
- Business lines of credit—Be approved to borrow up to a certain amount when you need it.
- Equipment financing—Purchase the equipment you need to flourish, using it as collateral.
- SBA loans—Benefit from one of the many lending and investment products for manufacturers offered by the SBA, including the CDC/504 Loan Program, 7(a) loans and microloan program.
- USDA loans—Build your manufacturing business with working capital, real estate, equipment or inventory loans from the USDA.
Clear Skies Capital has helped many manufacturing businesses with their financing needs. If you have any questions about how to secure a business loan for your manufacturing business, give Clear Skies Capital a call at 800-230-9822. You may be pleasantly surprised at what you qualify for.