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Are you a manufacturer looking to expand your business operations but don’t have the necessary funds? As a business owner, you understand the importance of capital in scaling your operations, purchasing equipment, and hiring skilled staff. Fortunately, various financing options are available to manufacturers, including a manufacturing business loan.
This blog post will explore the ins and outs of manufacturing loans and how they can be used to grow your business. We will delve into the different types of business loans available for manufacturers and the various financing options in the market.
Keep reading to understand better how a manufacturing business loan can be a valuable tool for taking your business to the next level.
What Is a Manufacturing Loan?
According to the Federal Financial Institutions Examination Council, business or commercial loans are a common type of loan provided to business enterprises involved in commercial or industrial activities, including sole proprietorships, partnerships, or corporations.
Manufacturing business loans, also known as commercial loans or C&I loans, play a significant role in providing businesses with the financial resources needed to grow and succeed. As highlighted by the Federal Reserve Bank of San Francisco, these types of loans are crucial for the banking industry and represent a fundamental source of funding for the business sector.
Whether you want to purchase new equipment, expand your operations, or hire additional staff, a manufacturing loan can help make your goals a reality. As a manufacturer, a commercial loan can be a useful tool to help finance your business ventures and maintain a steady cash flow.
It’s important to understand the different types of manufacturing business loans available and the associated repayment terms and interest rates to decide when selecting a loan that best fits your business needs.
Types of Business Loans for Manufacturing
Manufacturing businesses can access various loan options to obtain the necessary capital to start, expand, or grow their operations. One such option is an SBA loan, a lending program administered by the U.S. Small Business Administration. According to the SBA, their lending and investment offerings have given manufacturers over $5 billion in capital. SBA loans may offer more favorable terms than traditional commercial loans, making them a popular choice among manufacturers.
Rural manufacturers may also benefit from a USDA guaranteed loan. These loans are available to manufacturers located in rural areas, and like SBA loans can offer more favorable terms than other financing options. USDA guaranteed loans must be collateral secured and can be larger than SBA loans, with loan limits up to $25 million. To see if your business qualifies as rural, check out First National Bank of Oklahoma’s mapping tool here.
Equipment financing bank loans are another popular option available to manufacturers. As stated by the U.S. Chamber of Commerce, this loan is often used to upgrade or replace outdated machinery, increase production capacity, or improve production efficiency.
As per Business News Daily, invoice financing or “factoring” is a loan option that allows manufacturers to sell their unpaid invoices to a lender in exchange for immediate cash. This type of loan is particularly useful for manufacturers that operate on a tight budget or have cash flow constraints. First National Bank of Oklahoma does not typically offer this sort of financing.
How Can I Use a Manufacturing Business Loan?
If you’re wondering how to use a manufacturing business loan, the Small Business Administration (SBA) provides a comprehensive list of options to help you determine how to allocate your funds. One popular use of a manufacturing business loan is to purchase and upgrade equipment. With new equipment, you can improve production efficiency, reduce costs, and increase output capacity, ultimately leading to higher revenue.
Another way to use a manufacturing business loan is to expand or renovate facilities. If you need additional space, a business loan can help you cover the cost of construction or leasing, providing you with a larger production area.
Moreover, a manufacturing loan can also be employed to procure inventory, execute improvement strategies, devise management plans for your workforce, explore international markets, and research innovative manufacturing processes.
What Financing Options Are Available for Manufactures?
When it comes to financing options for manufacturers, there are various alternatives available aside from the types that have been previously mentioned. Investopedia notes that certain financial institutions or banks provide renewable loans that can be extended without limit, providing a flexible and ongoing source of funding for manufacturers.
Further, Manufacturing.net emphasizes that manufacturers may consider term loans as an alternative financing option with interest rates that fluctuate based on credit, term, and funding timeframe. Although the requirement for collateral may vary based on the lender and their creditworthiness, personal guarantees are usually necessary.
Grow Your Manufacturing Business With Financing
A manufacturing business loan can give you the necessary capital to grow and expand your business. There are various ways to utilize these funds, from purchasing equipment to exporting to international markets. It’s important to research different financing options to find the best fit for your needs.
Contact First National Bank of Oklahoma today to explore financing options that can help your manufacturing business grow and thrive.