Financing for manufacturing
Manufacturers balance machinery, inventory and customer terms. Financing can match each to the right structure.
Key points
- Manufacturers tie up cash in raw materials, work in progress and finished goods.
- Machinery is expensive but holds its value, which makes it good collateral.
- Large orders can require financing before the customer pays a cent.
- Lenders look closely at your margins and how concentrated your customers are.
How financing works in manufacturing
Manufacturing is capital-heavy. You buy raw materials, run them through expensive machinery, hold finished stock, then wait for customers to pay. A single large order can need months of working capital before it turns into cash.
Financing helps on both ends: equipment financing for the machines that drive capacity, and revolving credit or factoring for the cash tied up in inventory and receivables.
Common financing needs
Here’s how businesses in this industry typically match their needs to the right kind of financing.
| What you need | Usually the best fit | Why |
|---|---|---|
| New machinery or a production line | Equipment financing | Spread the cost over the machine’s working life, secured by the machine |
| Inventory and raw materials for a big order | Lines of credit | Borrow against inventory and receivables as the order moves through production |
| Cash tied up in receivables | Invoice factoring | Advance against invoices to large customers on long terms |
| Expand the plant | Term loans | A lump sum for build-outs and capacity, repaid over several years |
How NorthMerit can help
Apply once and we’ll connect you with one financing partner who works with businesses like yours. It’s free, and there’s no obligation.
What lenders look at
Lenders look at your gross margins, your customer mix, how quickly inventory turns, and the age and value of your equipment. Long-term contracts with strong customers make lenders much more comfortable.
For larger lines of credit, lenders often lend against a percentage of your receivables and inventory. Clean, current inventory reports make a real difference to how much you can borrow.
Other things partners commonly ask about: machinery with long useful lives; inventory and raw materials; large customer contracts.
Funding a new line
A food manufacturer adds a $450,000 packaging line to take on a national retail contract. It finances 90% over seven years and keeps its line of credit for ingredients.
How to prepare
Prepare two years of financial statements, a current inventory report, an aged receivables report and quotes for any equipment. If a new contract is driving the need, include it. It shows the lender where the repayment will come from.
Common questions
Is NorthMerit a lender?
Does it cost anything to apply?
Who will contact me?
Other industries
The right financing, from the right partner.
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