If your company manufactures products for busy retailers, you know how essential it is to boost inventory to match key busy sales seasons. Then again, just because a hectic season is approaching doesn’t mean you have adequate access to working capital to meet demands. This can be incredibly challenging if you’re trying to cover the cost of labor, materials, and production, knowing that you may not receive payment for months after.
Since a working capital shortage can easily lead to limited cash flow during significant times of the year, you need intelligent solutions to keep your company running smoothly so that your business can meet your client’s demands. In addition, by actively problem-solving for working capital solutions, your company will have the credit required to meet spikes in demand and production without halting the manufacturing process.
For this reason, many manufacturing industries should consider a credit facility to work with to avoid limited funds or halts in production.
What Are Credit Facilities?
Credit facilities offer business or corporate finance opportunities without the hassle of traditional lending restrictions. In addition, these specific loans and credit options have flexible repayment situations based on the applicant’s history of debt repayment.
Manufacturing industries must continue running production lines; a credit facility provides the essential opportunity for future viability. One of the many benefits of credit facilities is providing financial stability through reliable cash flow. Since any rapidly expanding business needs to stabilize operations, seeking a credit lender to help facilitate coverage is essential.
Credit Lenders vs. Traditional Banking
Building credit for a business is an integral part of growth and expansion. If you need to cover costs during production lulls, make repairs, or even upgrade to new machinery, it’s vital to access working funds. While your business may consider financing with banks, this traditional lender is fraught with hoops you have to jump through, such as:
- Penalties for early loan repayment
- Significant collateral against loans
- Longer loan term requirements
- Stricter application process
- Prolonged wait time for loan approval
- Limitations on withdrawal
- Higher borrowing costs
- Stricter credit risk assessment
- And more
Unlike a bank lender, a credit lender offers less strict qualification factors for a business line of credit or business loan. In fact, they only ask for minimum qualifications to vet potential applicants, including:
- Average of $200,000 in annual revenue
- Business owner’s credit score above 600
- At least six months in business
- A solid business credit bureaus score
- Tax returns, banking statements, & other helpful documentation
This relatively straightforward and fast process allows small business owners access much-needed cash flow and working capital. Additionally, many lending facilities arrange payback options based on each loan or credit line so that would-be applicants can select the preferred choice for their company.
Short and Long-Term Credit Facilities
There are two major types of credit lenders: short and long-term. Short-term lending offers working capital to help pay off creditors and bills. On the other hand, long-term lending is generally used by banks to help meet expenditure requirements. For example, if a business is looking to expand production, purchase new equipment, or cover additional costs, investing in a short-term loan or credit option offers flexibility and accessible collateral coverage. Usually, credit score plays a significant role in determining the size and interest rate of the borrowed amount, but there are different options available that accommodate needs.
Options available include:
- Small Business Loans
- Business Line of Credit
- SBA (Small Business Administration) Loans
- Business Cash Advance
- Medical Practice Financing
Companies should consider the wide range of financial options available.
Why Manufacturers Need to Utilize Credit Lenders
Some manufacturers have drastically different revenue-generating seasons. Access to cash flow can help avoid dips between production and receiving payments on your accounts. You won’t need to wait long to get approval for a more extensive line of credit for many credit lenders. This versatility is crucial to industries where rapid influxes in production demand require immediate financing.
Manufacturers with limited working capital can find themselves in a cash flow shortage. If this happens, it can bring production to a screeching halt, often when you must ramp it up. By proactively planning and managing working capital with the help of a credit lender, businesses can ensure they have access to money during peak production periods, like major holidays.
This is especially true for moments when a sudden surge of business occurs thanks to quality advertising campaigns - from social media to TV and everything in between. But, without working capital, companies can’t rise to meet demands, potentially losing out on significant sales revenue.
Benefits of Manufacturing Loans
- Cash Flow: Since manufacturers can wait months for invoice repayments, adding new clients or projects can be tough without access to additional cash flow from credit facilities. A business line of credit or short-term loan is an excellent solution to cover general operating expenses.
- Managing Payroll: Payroll balances between waiting for invoice repayments and effectively paying purchase orders. Since small businesses can’t halt production during limited funding periods, they need access to working capital through business loans. Keep payments moving with the peace of mind that they will be available.
- Equipment Financing: Whether it’s new technology, software, or equipment, businesses must invest in these essential assets to compete. Businesses need access to equipment financing with a reasonable interest rate to help gain new clients, reduce labor costs, and keep production running smoothly. One of the biggest benefits of equipment financing is that you can use your machinery as collateral for loans, thereby avoiding greater business loss if you cannot meet payment requirements.
- Inventory and Supply Chain: If you’re a business that thrives during select seasonal time frames, you will need access to working capital to help bolster inventory to meet supply and demand. Borrowing with business loans is an excellent way to help manufacturers get access to working capital in a short period.
Now that you have a clearer picture of why manufacturers need access to capital, let’s explore the select manufacturing industries that benefit most.
9 Different Manufacturing Industries That Benefit From Credit Facilities
A wide range of manufacturing industries can benefit from a capital lender or financial facility. Manufacturing companies require funding to keep production flowing smoothly to cover the many costs from every production level. Take a look at some of the wide range of industries that utilize smart manufacturing loans and other opportunities:
1. Fabricated Metal
Metal fabrication has many applications throughout numerous industries and consumer products. This manufacturing trade includes heavy equipment, structural metal hardware, and everything. Companies must consistently work with suppliers to meet production needs, which means that access to cash is vital.
Since it’s also heavily tied into other industries, including construction, energy, auto, and aerospace, its product demand ebbs and flows based on the global economy. If the economy is booming, it’s easier to cover expenses; however, things can take a turn at a moment’s notice, leaving businesses needing extra working capital to reduce impacts from negative influences. Fortify your organization’s financial strategy with a revolving line of credit.
The furniture manufacturing industry encompasses designing, producing, distributing, and selling office, home, and institutional furniture products. With the popularity of design shows and home decor, the push for new furniture is exceedingly growing. This increasing demand for furniture means global furniture manufacturers must act quickly to ramp up production.
Investing in a financial plan is a good idea if your company needs to make significant machinery repairs, purchase new equipment, or even cover payroll expenses. Sure, you may have an increase in cash, but it’s still a great idea to manage working capital without dipping into the cash savings.
3. Consumer Products
These niche products focus on the material goods that everyday consumers purchase, including clothing, food, and other additional final products that don’t fit other categories. Many of these items are found in homes and schools, are used for personal use, and are grouped into three main categories: durable goods, nondurable goods, and services.
The consumer product market moves rapidly and relies on constant production. Any manufacturer looking to bolster their production and capture return investment must consider having a revolving line of credit that offers flexibility and versatility to match their industry.
It’s no mystery that plastic is in nearly every packaging, product, and item consumers use; therefore, these materials are essential to the U.S. economy. With such a great demand for plastic, production can’t afford to stop due to inadequate machinery, gaps in invoice payments, or other unforeseen factors.
Instead, those who work within this billion-dollar trade know that they need to stay on the cutting edge of technology. Companies can cover equipment and other business essentials with strategic loans or a line of credit.
5. Wood & Paper
The wood pulp and paper industry needs raw production materials to produce all the paperboard, paper, and other cellulose-based products. With less need for economic expansion, there may be more lulls in paper production. Nevertheless, having cash in the interim period is even more important for bill coverage.
6. Textiles & Apparel
While there is always a need for raw clothing production, this billionaire-dollar industry also experiences unique seasonal spikes. Due to this, manufacturers must create a financial plan for lull periods, added import tax restrictions, and payroll coverage. With credit facilities, you can access immediate capital to cover any lags in production cycles.
Since the demand for oil and gas continues to grow, companies need coverage for either upstream, exploration, production, or drilling. There is a higher credit risk with petroleum companies which could limit traditional finances. Thankfully, modern lenders offer various options for businesses to gain assets and cover expenses. Work with a credit specialist to find the best solution for your business.
Industrial chemical companies primarily convert raw materials into thousands of finished products. From metals to minerals to oil and everything in between, chemical companies need access to high-functioning and particular equipment. If your business is expanding, a credit facility helps provide the required tailored loans and credit options.
9. Firearms, Parts, and Accessories
In 2020, there was a significant and rather unforeseen spike in gun ownership and purchasing within the states. This is an excellent example of how businesses need access to immediate funds to match the fluctuating desires of consumers. If there is a sudden spike in interest for this manufacturing company, there must be working capital to protect your resources and output.
The Construction Industry
While the primary manufacturing industries are listed above, construction is another honorable mention that benefits from using a credit lender. While it’s not considered manufacturing, it’s a major component of the national gross domestic product; therefore, construction is in its category. Specific financing is geared toward the construction industry’s unique needs. One such specific option is equipment financing.
Equipment financing is a flexible funding solution that covers all small and big-ticket equipment-related essentials using the machinery as collateral. For example, a business line of credit works similarly to a credit card, providing a hassle-free and steady cash flow. Plus, you only pay interest on the number of funds you use.
Explore additional construction financing options from AdvancePoint Capital.
AdvancePoint Capital: Helping You Meet Your Manufacturing Goals
Shopping around for the best loan option can be unnecessarily frustrating, especially if you are under time constraints to meet production deadlines. Instead, take advantage of the wide range of loan and financing options from a reputable credit lender, like AdvancePoint Capital, that provides flexibility and freedom when you need fast capital.
Our knowledgeable loan specialists have experience helping diverse manufacturers get the business credit they require. Get results within a day, thanks to our straightforward and streamlined process.
Get a quote today to start growing your manufacturing business with help from AdvancePoint Capital.