Types of business loans for manufacturers

Manufacturing Business

Manufacturing business involves all the processes required to assemble a product like extracting raw materials, purification of such raw materials, applying human workforce and/or machines to assemble and create an end product. This business is quite common in all countries as it supports the nation’s needs as well as for export purposes. That being said, it is clear that such businesses require monetary funds for proper functioning. Not all such large-scale businesses can afford enormous funds and hence, they turn to the option of loans. Here are the top 10 business loans for manufacturers one can opt for:

1. Term loans

When you are in dire need of capital or when you are looking for options to invest in a successful business arena.

2. Business lines of credit

This type of loan is best if you are looking for funds that you can set aside and use during emergency situations or as we technically call it ‘call cushions’.

3. SBA loans

If you are a successful businessman/woman and you are looking for a long-time loan option, then this loan option is a perfect fit.

4. Equipment financing

When business owners need funds in order to invest in machinery, tools, or vehicles required for their business, they take up an equipment financing loan.

5. Commercial real estate loans

This loan helps businesses to invest in commercial properties like shops, restaurants, malls, etc.

6. Invoice financing

When a business offers raw material to another business that has to manufacture the output, there arises a situation wherein one can’t pay off the invoices provided by the other. For such situations, this loan will help in wavering off the debts and help the businesses to start with a clean slate.

7. Microloans

Microloans is a perfect option if you are looking for small sums of money.

8. Merchant cash advances

One can go for this option if they aren’t eligible for applying bank loans. The flip side of this option should also to be taken into consideration.

9. Personal loans for business use

If you are a budding start-up business and you require funds to invest in immediate requirements, this loan option is for you.

10. Business credit cards

As the name suggest, this loan option is a quick hassle-free cash transaction which doesn’t involve huge sum of money.

Now let’s look at a few options in detail:

• Small Business Administration (SBA) Loans:

The Small Business Administration is a government body that supports aspiring businessmen and women to realize their dreams. They do not provide monetary funds and loans directly but they direct the businesses to banks and agencies that provide excellent services. SBA loans are perfect for budding start-ups and small-scale businesses a by helping them acquire the required capital and funds to invest in their business and in profitable spheres of the same. They also support well established firms with funds and loans but the process and paperwork vary.

Though this is a great option one must also have knowledge of its cons. This includes the enormous paperwork that comes along as it is a government body. This also includes a background check of the firm like its credibility, annual turnover, employee details, and many more.

• Equipment financing:

Equipment financing loan options is for businesses which require funds in order to invest in the machinery and tools required for manufacturing. This can be availed by both small and established businesses. Another positive aspect of this loan option is that you can either loan such machine parts or you can take them up for lease. This loan option is different from other options as it doesn’t require collateral. This is because, the machinery loaned or leased in this case by itself is the collateral. One can loan or lease any type of machinery like computers, printers, lasers, pumps, cranes, drillers, etc.

For instance,

Loan amount	Interest rate
$2K – $250K	7% – 39%
$3K – $1M	11% – 19%
$5K – $2M	6% – 24%

While certain banks and agencies provide a concrete time period, some might fix the time span depending upon the machinery one loans.

• Unsecured business loans:

Unsecured manufacturing business loans are those which require no collateral or assets. Funding agencies take in account of the credibility, financial strength, cash flow, annual turnover, investing potential, and other such factors before providing loans to businesses.

Since this type of loan option has higher risk factors when compared to others, the interest rates are also higher. The business owner has to provide the lending agency with complete credit scores, receipts, documentations, etc. to prove their credibility.

Though this type of loan option doesn’t demand asset submission, one needs to pay attention to the interest rates that can rocket up and cause severe debts. But however, if you have a clean credit score, you needn’t worry about such flip sides.

• Microloans:

This type of loan option is fit for those who require only a small sum of money for capital payment, to fix any glitches, to meet unfortunate emergencies, or for expansion. Since the amount is small when compared to other loan options, interest rates can be expected to be comparatively low and this depends upon the lending agency and bank. It can be also seen that pre requisites like monthly credits, cash flow details, and documentations aren’t expected to an extent the other loan options require.

SBA loans as discussed before also offer such microloans options to help start-ups and small-scale industries. They provide such microloans for a period of over six years and the interest rates vary between 9% to 16%.

• Business credit cards:

This option is preferred by businesses that need funds for emergency purposes. This method assures the business owners a stress-free money transaction to pay off immediate expenses that can be for invoice purposes or for servicing the machinery etc. They also amp up your credit score and reward point. In the beginning stages this may be treated as an interest-free mode of loan option.

By knowing such essential details about the business loans available for manufacturers, one can take well-informed decisions soon.