7 Reasons You Should Apply for a Manufacturing Loan

Businesses in the manufacturing industry keep our economy running smoothly. Without manufacturers, shelves in supermarkets and stores nationwide would likely be completely empty.

We need manufacturers to provide various products for daily life and other business operations. Running a manufacturing company can be quite successful, but sometimes these types of businesses can run into a few roadblocks regarding funds.

Banks, credit unions, and online lenders offer financing options and loan products, providing manufacturing companies with the working capital required to keep things up and running year-round. Here is a list of reasons why you should apply for a business loan for manufacturers.

The Manufacturing Business: A Primary Economic Player

Manufacturing is an overarching term used to describe a wide variety of businesses. You might imagine rows of never-ending assembly lines and heavy machinery, but manufacturing can mean so much more.

Pretty much everything consumers buy goes through a manufacturing facility. From the initial creation of a product to its placement in containers and shipment to stores or consumers, manufacturing covers a lot of bases.

For example, a company that creates beauty products might manufacture each item from raw materials, package it on-site, and provide shipping services to various stores. Food manufacturers may do the same, just with a different product. Car parts and other mechanical items are also made and often distributed by different manufacturing companies.

As you can see, manufacturing can mean many different things. Regardless of the product a manufacturing business supplies, they'll surely require business financing at some point to continue growing and improving operations.

Major Reasons to Apply for Manufacturing Loans

Investing in your manufacturing business is essential for growth. As a result, owners of manufacturing companies often seek business financing or manufacturing loans from banks, credit unions, or online lenders to continue improving their small businesses.

Let's explore why it's so essential for your small business to apply for loans in the manufacturing industry:

1. Working Capital

After dipping your toes (or diving headfirst) into the manufacturing industry, you might wonder about the best methods to grow your business. Working capital is one thing small businesses can't survive without. Manufacturing loans can help improve cash flow, bringing more working capital to your small business.

So, what is working capital? The answer to that question is really quite simple.

Calculating your company's working capital requires an appraisal of your business's assets minus its liabilities. Liabilities are outstanding debt obligations or other things that small businesses spend money on to keep things running smoothly, such as:

• Loans and Financing
• Accounts payable
• Employee payroll
• Expenses
• Operating costs
• Bonds
• Mortgages
• Leases and rentals
• Legal protections

After all, liabilities are paid each month or year, the remaining money makes up a company's working capital. Business owners often utilize the leftover assets to meet payroll demands, start a big project, hire employees, invest in marketing, expand the business, or buy new supplies and inventory.

2. Inventory

Every manufacturer requires inventory to operate efficiently. Business loans for manufacturers help meet inventory requirements. Your company may keep several essential items and supplies on hand, such as:

• Raw materials
• Ingredients
• Packaging and shipping supplies
• Seasonal/holiday inventory

Having a healthy inventory helps put your business ahead. For example, you can invest in seasonal stock around the holidays or maintain smooth shipping operations with business funding for manufacturers.

3. Equipment Purchases

For businesses in the manufacturing industry, functioning without proper equipment and machinery is pretty much impossible. But, let's face it, manufacturing equipment can be costly for a startup company.

Most small business owners think they must choose between leasing and buying equipment to meet the demands of daily operations in the manufacturing business. Luckily, leasing and buying manufacturing equipment isn't the only option.

Manufacturing business loans help meet the need for heavy machinery, allowing you to purchase new and used equipment, repair existing machinery, and fix smaller tools.

Some common kinds of equipment required for running a manufacturing business include:

• Packaging equipment
• Molding and die-casting machines
• Cutting machinery (laser cutters, die-cut machines, etc.)
• Drilling, milling, and grinding equipment
• Industrial printers and computerized systems
• Production lines and production machinery
• Lamination machines
• Metal-working tools
• Handheld power tools
• And more!

Equipment loans are an attractive option for any small manufacturing business. One great feature of this business loan is that your company gets to keep the equipment after meeting the full repayment terms in the agreed-upon period.

4. Unexpected Cash Flow Issues

Sometimes your small business can't avoid a few bumps in the road. Unpaid invoices, investments in new projects or products, and other significant costs can create a cash shortage for small businesses.

Cash flow problems can put your company behind the competition. Business loans for manufacturers make it much easier to deal with daunting cash flow problems before they extrapolate. With a manufacturing loan, your business can meet the demands of purchases, payroll, projects, expansion, and more.

5. Hiring and Payroll

Business owners can't expect high-quality employees to stick around if payroll issues continue to persist. Manufacturing loans help small businesses in this industry meet payroll demands for existing employees. This type of business funding can also help small businesses find and secure top candidates for open positions.

6. Business Expansion

Business expansion is vital in the manufacturing industry. As your company grows, it'll likely need more space for inventory storage, shipping operations, and manufacturing.

Many manufacturing businesses start in small buildings but have outgrown their initial startup locations over time. Small business loans aid expansion and renovation, so your manufacturing business can fit into a facility that meets the demands of daily operations and annual growth expectations.

Although loans for manufacturing companies are an excellent product for newer businesses in the industry, it's also a great business financing tool for more established entities. These loans give small businesses the working capital required to renovate existing locations or expand into new ones.

7. Marketing and Advertising

The manufacturing industry is specialized, requiring specific, intentional marketing and advertising campaigns to grow your client base. Keeping your company's name in front of potential customers is crucial, beating out your competitors. Loans for manufacturers can be put towards print advertising, commercials, billboards, or additional digital marketing efforts.

The Best Business Loans for Manufacturers and Manufacturing Companies

Even with a significant amount of initial investments and a steady stream of sales, manufacturing companies can burn through a lot of their money in minimal amounts of time. Traditional lending outlets like banks and credit unions can tie up small business owners in unfruitful financing obligations.

Instead, business owners in the manufacturing industry should seek alternative lending products to help propel the company forward instead of keeping it held down with daunting repayment terms.

Below, we look at the best business funding options from online lenders like AdvancePoint Capital for manufacturing companies:

Term Loans

Manufacturers might select a term loan to meet the demands of daily operations and long-term goals. Small business owners can take advantage of two unique term loan options:

Short-Term Business Loans

Short-term loans are a popular option for companies that need fast cash. Typically, that includes smaller startup operations trying to get on their feet.

Short-term loans offer a fixed amount of money with set terms and factor costs. Payments are made directly from a business bank account based on the terms and agreed-upon payback rate. Most short-term loans have a repayment period lasting less than 18 months.

Breakdown of Short-Term Loans:

• Fast, same-day funding
• All credit profiles considered
• Limited paperwork
• Easy application and quick approval
• Limited repayment period (18 months or less on average)
• Monthly or weekly payments

Long-Term Business Loans

Another term loan option for manufacturing business owners is a long-term loan. Unlike short-term loans, this financing option has an extended repayment period lasting at least two years or more.

Long-term loans provide a lump sum of cash upfront, with costs based on principal and interest rates. Many small business owners select long-term loans to help finance significant investments such as expansion and renovation.

Breakdown of Long-Term Loans:

• Low-interest rates and origination costs
• Repayment terms from 2 to 5 years
• Monthly payments
• All credit profiles considered, good to excellent preferred
• Greater loan amounts available

Each term loan option comes with its own positives and negatives. For example, businesses that need access to working capital immediately might gravitate towards short-term loans, while more established companies can opt for long-term loans.

Long-term loans have stricter eligibility requirements than their short-term counterpart. As a result, small business owners struggling to improve their credit scores might choose a short-term lending option instead.

Invoice Financing

Invoice financing or factoring is another great solution for small businesses struggling to meet short-term cash flow needs. This financial transaction allows businesses to receive an advance on client invoices before the expected payment date.

Invoice factoring companies typically take advances off receivable invoices 30 or 60 days before customers actually pay them off. Thus, invoice financing is a fantastic option when a company requires quick access to funds.

Highlights of Invoice Financing:

• Low fees - typically no more than 2% of the invoice
• No monthly payments
• Credit requirements are based on customers, not the business
• Easy application
• Fast access to working capital

Purchase Order Financing

Purchase order financing is perfect for manufacturers who often complete large wholesale orders. However, when customers place a significant order with a small business, it can be challenging to afford the supplies required to meet demands. That's where purchase order financing can come into play for manufacturers.

Instead of struggling with the challenges of covering costs for supplies themselves, many manufacturers choose purchase order financing to solve recurrent cash flow issues. Lenders will provide direct payment to suppliers, so your company can quickly fulfill orders.

After an order is complete, your customer pays a purchase order financing company directly rather than sending the proceeds to you. Then, the purchase order financing company returns the remaining balance to your business.

Purchase order financing can be highly advantageous for companies that take on large projects or customer orders, like:

• Manufacturers
• Wholesalers
• Resellers
• Distributors
• Import/export businesses

Purchase orders can be continuous or a singular transaction. This financing option allows businesses to pay for the costs of supplies and other essential items without using available capital, allowing companies to take on more orders. Purchase order financing is a flexible financing product for startups or companies tight on cash.

Highlights of Purchase Order Financing for Manufacturers:

• Transaction is immediate
• Low origination fees
• No credit evaluation
• Minimal costs
• Quick application
• One-time or continuous transactions
• No commitments

Equipment Loans for Manufacturing Businesses

Equipment is at the core of running a quality business in this industry. As a result, equipment financing is a popular tool to help meet the demands of daily operations.

These affordable loans are typically structured so that the equipment acts as collateral. After the terms of this financing option are met, the machinery becomes the property of the manufacturing business. Repayment periods can last anywhere from one to seven years, helping keep cash in company reserves.

Equipment loans aren't only used to obtain heavy manufacturing machinery. Business owners also utilize funds from equipment financing for repairs, regular maintenance, and purchasing smaller tools or trucks and other vehicles.

So, funding from equipment loans can improve product quality, reduce labor costs, and strengthen a business's overall structure.

Pros and Cons of Manufacturing Loans

When considering a manufacturing loan, it’s essential to weigh both the advantages and potential drawbacks. Different loan products—including term loans, SBA 7(a) loans, equipment financing, and secured loans—come with unique features that can impact your business’s finances and growth opportunities. Below, we explore the key pros and cons, using important terms and factors highlighted by leading industry sources.

Pros of Manufacturing Loans

• Access to Working Capital: Manufacturing loans provide essential working capital to cover day-to-day expenses, manage supply chain issues, and maintain smooth operations—even during periods of fluctuating cash flow.
• Equipment Financing: Many lenders offer equipment financing specifically for purchasing or upgrading manufacturing equipment. This allows businesses to invest in advanced machinery or technology without depleting reserves.
• Facility Expansion: Loans can be used to purchase, upgrade, or expand a manufacturing facility, enabling businesses to increase production capacity and scale operations as demand grows.
• Competitive Interest Rates: Options like SBA 7(a) loans often feature lower interest rates compared to other forms of credit, making them attractive for manufacturers seeking affordable long-term financing.
• Credit Building: Successfully managing and repaying a manufacturing loan can help build your business credit history, improving eligibility for future financing.
• Refinancing Opportunities: Some loans allow manufacturers to refinance business debt, potentially lowering monthly payments and freeing up cash for growth initiatives.

Cons of Manufacturing Loans

• Collateral Requirements: Many manufacturing loans—especially secured loans and equipment financing—require collateral such as business assets, manufacturing equipment, or real estate. This can put company property at risk if you default.
• Strict Credit History Standards: Lenders often require strong business or personal credit scores. Businesses with limited or poor credit history may face higher interest rates or struggle to qualify.
• Prepayment Penalties: Some loan agreements include prepayment penalties, which can limit your flexibility to pay off loans early or refinance if better terms become available.
• SBA 7(a) Loan Disadvantages: While SBA 7(a) loans offer attractive rates and terms, they can involve lengthy approval processes, extensive documentation, and strict eligibility criteria.
• Variable Interest Rates: Not all manufacturing loans have fixed rates. Depending on your qualifications and the product selected, interest rates may vary and increase your total repayment cost.
• Impact of Debt on Growth: While loans can fuel expansion, taking on excessive debt may strain cash flow and limit your ability to invest in new opportunities or weather supply chain disruptions.

Key Considerations

Before choosing a manufacturing loan, carefully assess your business’s needs, credit profile, and long-term goals. Consider the type of loan—whether it’s equipment financing, a secured loan, or an SBA 7(a) product—and review all terms, including collateral requirements, prepayment penalties, and the potential to refinance business debt. Weighing these factors will help ensure you select the right financing solution to support your manufacturing business’s growth and stability.

This section is structured to align with competitor content and incorporates all of the relevant terms you listed, providing readers with a clear, concise, and comprehensive overview of the pros and cons of manufacturing loans.

Eligibility and Application Process for Manufacturing Business Loans

Securing a business loan for your manufacturing company involves meeting certain eligibility requirements, gathering supporting documents, and following a structured application and approval process. Understanding these steps can help you prepare effectively and improve your chances of approval.

Typical Eligibility Requirements

Lenders—whether banks, credit unions, or online lenders—set minimum eligibility requirements that manufacturing businesses must meet to qualify for funding. These often include:

• Meeting the SBA’s size limits for a qualifying small manufacturing company (usually based on number of employees or annual revenue)
• Operating as a registered, for-profit business in the U.S.
• Demonstrating sufficient business cash flow to support loan repayment
• Having a minimum length of time in business (often at least 3 months)
• Meeting minimum monthly or annual revenue thresholds (for example, \$10,000 per month or \$120,000 per year)
• Meeting credit score requirements (lenders may require a business or personal credit score of 450+, though higher scores improve approval odds)
• Not being delinquent on existing government debts

Required Documentation

When applying for a manufacturing business loan, you’ll need to assemble a comprehensive set of supporting documents. These help lenders assess your business’s financial health and ability to repay:

• Loan application form (specific to the lender or SBA)
• Personal financial statements for all owners with 20%+ stake
• Business financial statements (balance sheet, profit and loss, cash flow statements)
• Business tax returns (typically for the past three years)
• Personal tax returns for all business principals
• Business license or certificate of incorporation
• Business lease agreement, if applicable
• List of business affiliates and subsidiaries
• Overview of business history and purpose for the loan
• Details of any outstanding business debt
• Resumes of business principals

The Application and Approval Process

The process for securing a manufacturing business loan generally follows these steps:

• Assess Your Qualifications: Review lender requirements, including the SBA’s size standards, revenue minimums, and credit score criteria.
• Choose the Right Loan Product: Decide between options such as a term loan, business line of credit, or SBA-backed loan, based on your working capital needs and business goals.
• Assemble Your Documents: Gather all required supporting documentation to streamline the application process.
• Submit Your Application: Complete the lender’s application form and provide all supporting documents.
• Lender Review: The lender evaluates your application, business financials, and creditworthiness. They may request additional information or clarification.
• Approval and Funding: If approved, you’ll receive a loan offer outlining terms, rates, and repayment schedules. Upon acceptance, funding is typically disbursed—sometimes within a few business days for smaller loans.

Practical Tips for a Smooth Application

• Double-check that your business meets all minimum eligibility requirements before applying.
• Prepare detailed and up-to-date financial statements.
• Maintain a strong business and personal credit profile.
• Be ready to explain how you’ll use the funds and how the loan will benefit your manufacturing operations.
• Respond promptly to lender requests for additional information during the approval process.

By understanding the eligibility criteria and preparing the necessary documentation in advance, you can streamline the application process and improve your chances of securing the funding your manufacturing business needs for growth and stability.

Industry-Specific Support and Resources for Manufacturing Businesses

Securing financing for a manufacturing business goes beyond simply choosing a loan product—it requires access to specialized guidance and industry expertise tailored to the unique challenges manufacturers face. Many lenders and financial partners understand the complexities of manufacturing processes, supply chains, and equipment investments, and offer consultative guidance to help businesses make informed decisions at every stage.

Consultative Guidance from Manufacturing Loan Specialists

Manufacturing loan specialists provide personalized guidance to help you navigate the financing landscape. These experts can assess your business needs, recommend the most suitable financing options, and structure loans that align with your operational goals. Whether you’re considering an equipment investment, expanding your facilities, or addressing supply chain disruptions, having access to industry expertise ensures your financing strategy supports your long-term growth.

Leveraging Industry Expertise for Better Outcomes

Lenders with deep experience in the manufacturing sector recognize the importance of efficient supply chains, advanced manufacturing processes, and the need for ongoing investment in technology and equipment. Their knowledge allows them to offer tailored solutions, anticipate industry-specific challenges, and provide resources that help manufacturers stay competitive.

Additional Resources and Federal Government Support

Many financial partners provide educational resources, business planning tools, and up-to-date information on federal government programs designed to support manufacturers. This includes guidance on SBA loans and other government-backed financing options that can make large equipment purchases or facility upgrades more accessible and affordable.

Personalized Support Throughout the Financing Process

From the initial consultation to the final approval, manufacturers benefit from a hands-on approach. Lenders committed to the industry often assign dedicated specialists who work closely with your team, answer questions, and help streamline the application and funding process. This personalized support helps manufacturing businesses secure the capital they need—when they need it—while minimizing disruptions to daily operations.

By partnering with lenders and financial partners who offer industry-specific support and resources, manufacturing businesses can confidently pursue growth, overcome operational challenges, and make strategic investments for the future.

Grow Your Operations With AdvancePoint Capital

Manufacturing is a booming industry with many moving parts. So whether you're a well-established business or a budding enterprise, funding is essential for success.

Securing loans or financing from conventional outlets like banks and credit unions can be tricky. Online lenders and alternative lending marketplaces give business owners — even business owners with bad credit — an opportunity to receive the capital required to keep growing and taking on new projects.

Promote your business, buy new equipment, expand operations, and complete other essential tasks typical in this industry. Contact AdvancePoint Capital today to explore a marketplace of valuable business loans for manufacturers.