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Best Manufacturing Business Loans

The manufacturing industry is packed with companies that started out using small business loans. Businesses, reliant on loans, have thus sparked a trillion dollar manufacturing industry. However, applying for and obtaining manufacturing business loans isn’t always straightforward.

At a glance There isn’t a single solution when it comes to selecting a manufacturing business loan. You may need to look at various options and mix and match a few of them to find the best solution for multiple expense categories.  

Introduction

A manufacturing business requires a massive capital injection. Financing is needed to establish the manufacturing site and to acquire new assets. However, getting a small business loan is often a time-consuming and overwhelming process. In this detailed guide on the best manufacturing business loans, our experts outline the top manufacturing business loans, and which lenders to approach.

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Best Manufacturing Business Loans

It’s now time to look at the specific financing solutions available for manufacturing business loans. Remember, there might be one option that covers all your needs, but you may be better off applying for different types for improved repayment terms. We’ve also indicated the key loan features and which lenders are the best per selection.

Financing Need

Best Loan Type

Loan Features 

Recommended Lender

Startup capital

SBA loans

  • Amount: Up to $5 mil
  • Term: Up to 25 years
  • Interest: From 6% and up
  • Time to get the loan: Up to 2 weeks

Funding Circle

Equipment 

Equipment financing

  • Amount: 100% value of equipment
  • Term: Up to 6 years
  • Interest: Between 4% and 40%
  • Time to get the loan: Up to 48 hours 

SmartBiz

Raw materials

Business line of credit

  • Amount: Up to $500,000
  • Term: Up to 18 months
  • Interest: Between 7% and 25%
  • Time to get the loan: Up to 24 hours

Fundbox

Inventory & payroll

Merchant cash advance

  • Amount: Up to $500,000
  • Term: Repaid weekly or monthly
  • Interest: Up to 1.5% of sales
  • Time to get the loan: Up to 24 hours

Square Capital

Daily operations & utilities

Invoice factoring

  • Interest - as low as 0.25% per week
  • Factoring lines up to
  • $5 million
  • Approvals as fast as
  • 24 hours

BlueVine

Material, machinery, equipment maintenance, fuel, supplies, salaries, inventory

Short-term loans

  • Amount: Between $5,000 and 500,000
  • Term: Up to 15 months
  • Interest: No interest rate, instead offers one-time factor rate 
  • Time to get the loan: Up to 24 hours

Fora Financial

Best Manufacturing Business Loans Explained

In this section, we will explain what you can expect to receive when you obtain a loan. You’ll also see why we recommended each of the lenders we presented.

1. Funding Circle - Best for SBA Loans

Approved lenders grant Small Business Administration (SBA) loans to small businesses to help boost the economy. The government endorses up to 85% of the total loan amount, giving breathing room so that you can focus on starting your company. However, there are massive penalties if you fail to repay.

These loans are ideal for obtaining the capital needed to start your manufacturing company. This type of loan can cover purchasing or development expenses, while you can also use it for operating funds during the first few years. What makes it suitable for new businesses is that you’ll receive education on planning and on how to spend the funds wisely.

Funding Circle is an approved SBA lender, providing discounts to businesses run by women and minorities. It has received positive reviews for its processes and standards, being praised by several new owners in the industry. You’ll have a dedicated manager for your account to help you manage the funds effectively too.

2. SmartBiz - Best for Equipment Financing

Equipment financing helps you purchase or lease the machinery and tools you need to operate your business. The most outstanding feature is that you’ll receive up to the total amount you require as long as you can justify the costs. Since it’s like a secured loan, you don’t need to worry if you have a poor credit rating.

Your machinery and equipment are the lifeblood of your manufacturing business. You will need everything to run smoothly with the latest technology. If you don’t manage to get approved for an SBA loan, equipment financing is the next best option.

SmartBiz specializes in SBA loans in the construction industry, but it also offers equipment financing as an alternative financing source. It doesn’t merely give you one option, but it also proposes several business models for your manufacturing company based on your objectives. It has a high loan approval rate with few requirements.

3. Fundbox - Best for Business Line of Credit

When it comes to covering expenses like payroll, maintenance, and daily operations, a business line of credit can be highly beneficial. The lender offers you a credit limit, but you only draw what you need when you need it. Furthermore, you’ll only pay interest on what you owe.

You can purchase raw materials for your manufacturing business when you’re in short supply with a business line of credit. When you receive income from sales, it’s easy to pay the borrowed amount back. Fortunately, you won’t activate any early payment fees, and the amount you owe spreads over the initial repayment period.

Fundbox is our recommended lender for its business line of credit for the manufacturing industry. You don’t need any collateral to receive funds, and there are no extra hidden fees. Most clients are impressed with its high approval rate. 

4. Square Capital - Best for Merchant Cash Advance

A merchant cash advance is the best solution for businesses that deal with bank card payments. The lender gives you a lump sum that you can use for your daily operations and takes a percentage of the sales performed on your card machines. There’s generally a monthly minimum income limit you will need to meet, otherwise, you’ll need to pay the total amount owed.

Most of your clients will probably pay for your manufacturing services online or through bank transfers, making a merchant cash advance a suitable funding choice. Once more, if you have a sufficient monthly turnover, you’ll pay your loan off in no time.

Square Capital offers merchant cash advance financing to members registered for its services. If you have a new business, you simply need to register using their quick application process. You’ll receive card machines linked to your loan account.

Square

5. BlueVine - Best for Invoice Factoring

Invoice financing helps you get funds based on purchases, in cases where you are owed payments. This loan type is useful when you are entering into contracts with special payment clauses, which may force you to wait between 30 and 45 days before receiving any money. Lenders buy these invoices from you in lieu of future payment, taking a small percentage as a fee.

You might start finding a clientele for your manufactured products that are only willing to pay after an extended period. Unfortunately, you have bills and employees to pay. Invoice factoring helps you cover these expenses until the clients pay their outstanding bills.

BlueVine is our lender of choice for invoice factoring. BlueVine boasts transparent fees, funding only for what you need, and larger credit limits.  

6. Fora Financial - Best for Short-term Loans

Manufacturing businesses have many expenses and sometimes they can get the better of even a brilliant business plan. Getting short-term loans allows companies to stay afloat even when finances are a bit tight.

Short-term loans offered by Fora Financial are quick and easy to apply for through an online portal. Approval can be reached within 24 hours and the funds, which can be up to $500,000, will be paid into the business’ bank account within only three days.

Such loans will allow a manufacturing business to pay for the maintenance of equipment, payment of taxes and supplies, and more. Fora Financial does not dictate what a business does with its funds. Getting approved is easy as well, with only basic requirements that must be met, such as the company being operational for at least six months.

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How Much Does it Cost to Open a Manufacturing Business?

Cost accounting is essential for any viable industry business plan. However, applying cost accounting to manufacturing business loans is slightly more complicated. The primary reason being that costs can vary according to the type of manufacturing business you’re entering into, as can the raw materials and equipment associated with it. You could spend between $250,000 and $1.5 million based on these factors alone.

To effectively plan for the potential costs, you need to look at four key cost elements: direct, indirect, variable, and fixed costs. Each of these will help you determine the loan types you’ll need, as you probably won’t find one loan that caters to all your requirements. 

Let’s have a quick look at what each aspect might consist of to understand the financial scope:

Direct costs (during production)Indirect costs (support and administration)Variable costsFixed costs
  • Raw materials
  • Machinery and equipment
  • Inventory
  • Depreciation of assets
  • Power, fuel, and supplies
  • Quality control
  • Office space/rental
  • Labor
  • Raw materials based on demand
  • Production labor (overtime)
  • Utilities and fuel
  • Facilities, machinery, and equipment
  • Overheads and labor (wages)
  • Insurance

One significant consideration is how much equipment you wish to purchase and how much you wish to loan. You will also want to think about if you want to rent or buy a facility or property for your business. While renting will save you money on immediate expenses, it will likely cost you more in the long-run.

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manufactoring

How to Choose the Best Manufacturing Business Loans

You need to select suitable manufacturing business loans in order to survive in this industry. Besides assessing loan terms, interest rates, and approval time, you’ll need to ensure that the loan you choose meets all your requirements. In some instances, this means applying for more than one loan type.

You need to be wise, though. If you look carefully, we’ve showcased several lenders that provide different solutions. So while you might apply for three loan types for various situations, you could find one provider that meets all your needs.

See Our Additional Guides on Industry-Specific Loans

Bottom Line

You don’t need to struggle when looking for manufacturing business loans, as there are many types currently on the market. The secret is deciding which loan type works best for you and knowing how to go about obtaining it. We hope that this guide has helped create clarity and has made the process of choosing the right manufacturing business loan for your needs easier.