Manufacturing Business Loans

What are the different types of manufacturing business loans?

• Bank Loans: This is the most traditional form of business loan and has generally fallen by the wayside in favor of more accessible term loans from online lenders. That said, for those with excellent credit scores and stellar business performance, they are often worth applying for. You can get some of the lowest interest rates (2-5%) and longest terms.
• SBA Loans: Term loans guaranteed by the Small Business Administration are the next most desirable, with interest rates no higher than 13%. Their 7(a) loan program is the most versatile, with funds available for any purpose, while their 504 loan program provides funding for large assets. They also have a Microloan program which provides funding for female-led and minority business owners up to $50,000. While desirable, they do have strict qualification requirements, often require a down payment and personal collateral, and it can take up to 12 weeks from when you start your application to when you get funding. That said, if you qualify and aren’t in a rush for funds, the interest rates make the wait worth it.
• Term Loans: Term loans are available from alternative lenders online and are some of the fastest ways to get the funding you need. Many lenders offer term loans with comparable terms as SBA loans for those with excellent credit, and reasonable interest rates for those with reasonable credit scores. You can borrow over the short term (as little as 3 months), medium term (1-3 years), or long term (3+ years).
• Equipment Loans: Equipment loans are term loans that are tied to the equipment you buy with the loan. These loans have limited use (you can only use them for equipment your lender agrees to) but because the equipment acts as collateral for the loan, you can often get better interest rates, even with a lower score.
• Business Line of Credit: Not strictly a loan, a business line of credit is a good option if you’re looking for a flexible way to borrow as and when needed. Much like a credit card, a lender will give you a maximum credit limit which you can borrow up to. You only pay interest on the money you’ve actively borrowed, and you can reuse the credit once you’ve paid it back until the line is closed.
• Invoice Financing: If you have long invoicing terms, you may find invoice financing helpful. Invoice financing is where you borrow the value of the invoice from a third party company, and pay it back (plus interest) when your client pays you. This can be a great way to smooth cash flow, provided you build in a buffer for the fees associated. There is also invoice factoring, which is where you sell an unpaid invoice to a third-party company. This is a desirable option for those with bad credit (since you’re not borrowing money), but be aware that you do lose control of the customer experience, so you may lose the customer in the long run.

What are the pros and cons of using a manufacturing business loan?

PROS

• Low interest rates compared to alternative forms of financing
• Predictable payments - usually monthly but some are daily or weekly
• You can expand your business quickly
• Paying religiously will help build your personal and business credit

CONS

• Nearly always require collateral
• Best loans require high credit scores
• Difficult to get for new businesses

How much does a manufacturing business loan cost?

How much a manufacturing business loan costs will depend on the interest rate you get. Make sure you do your math beforehand so you know exactly how much your loan will cost you on a monthly basis as well as overall. Use our calculator below to get an accurate estimate:

How to Qualify for a Manufacturing Business Loan

To qualify for a manufacturing business loan, you’ll generally need:

• A credit score of 600 or higher
• A minimum annual revenue of $50,000 - $100,000
• At least 1 year in business
• Be willing to put up a personal guarantee and in many cases a business lien too

Can I qualify for a manufacturing business loan with a low credit score?

Yes, there are some loans you can get with a score as low as 500, but you’ll need to do your research carefully. Make sure the loan is affordable for your business and consider waiting a few months so you can work on improving your credit score, if possible.

How to Apply for a Manufacturing Business Loan

The application process for most online lenders is straightforward - once you’ve chosen the right loan for you and checked that you meet their qualification requirements, click apply and follow their instructions. You’ll need essential business, personal, and financial information for your application, including your social security number, tax returns, profit and loss, financial forecasts, and in many cases, a business plan.

Compare and Apply Now

Have you decided a manufacturing business loan is the right next step for you? If so, it’s time to compare rates to find the best loan for your business. Remember that the interest rate you get is the most important factor in determining how affordable you’ll find repayments, so try to get the lowest rate you can. Look at our top loans and those listed in our tables until you find the one that’s right for you, and then apply. You’ll soon have the funding you need to grow your manufacturing business.