# Manufacturing business loans

Source: https://businessloanbroker.ai/industries/manufacturing/
Site: BusinessLoanBroker.ai (powered by Levr)

> Manufacturers get funded through equipment financing, asset based lending on receivables and inventory, and SBA 504 for facilities. What lenders check.

Manufacturers get funded most often through [equipment financing](https://businessloanbroker.ai/business-loans/equipment-financing/) for machinery, [asset based lending](https://businessloanbroker.ai/business-loans/asset-based-lending/) against receivables and inventory, and [SBA 504 loans](https://businessloanbroker.ai/business-loans/sba-504-loans/) for buildings and heavy equipment. Banks like manufacturing because the business owns hard assets they can value and resell. The catch is the cash cycle: raw materials are paid for months before customers pay, so working capital products matter as much as the machines.

## Key facts
- **Typical amounts:** $50,000 to $5 million, asset based lines to $20 million for larger plants
- **Products that fit:** Equipment financing, asset based lending, SBA 504 and 7(a), term loans, factoring
- **Usually decline:** Unsecured short term products and advances, which are a poor fit for monthly invoicing
- **Documents asked for:** A/R and A/P agings, inventory report, equipment list, customer contracts, financial statements
- **Typical minimums:** 2 years and positive cash flow for banks, a receivables borrowing base for asset based lines

## Which loans work best for manufacturing?

Equipment financing works best for CNC machines, presses, packaging lines and forklifts, because the machine is the collateral and used industrial equipment holds value. Asset based lending works best for working capital, because the line grows with your receivables and inventory instead of being capped by last year's profit. SBA 504 works best for buying or expanding a plant, with 10% down and a 25 year term on the real estate portion.

- Equipment: 3 to 7 years, 0% to 20% down, 6% to 18% APR, new and used.
- Asset based lending: 70% to 90% of eligible receivables and 30% to 60% of inventory, 8% to 18% APR.
- SBA 504: up to $5.5 million on the SBA portion, fixed rate, 10 to 25 years.
For a large order you cannot fund from the line, [purchase order financing](https://businessloanbroker.ai/business-loans/purchase-order-financing/) pays the suppliers.

## What do lenders like and dislike about manufacturing?

Lenders like hard collateral, long customer relationships, contracts or blanket purchase orders that show future revenue, and inventory that can be counted and valued. They like a controller who produces monthly financial statements and an aging that matches the bank balance.

They dislike customer concentration above about a third of sales, raw material prices that swing faster than you can reprice, long cash cycles with slow paying customers, and environmental exposure from the plant. Two years of losses, even with a good story, pushes most banks to decline and sends you to asset based lenders at a higher cost.

## How much can a manufacturer borrow?

Equipment lenders fund the full invoice, commonly $50,000 to $2 million per machine, with larger lines possible for a whole production cell. Asset based lenders set a borrowing base: typically 80% to 90% of receivables under 90 days plus 30% to 60% of finished goods inventory, which for a plant with $600,000 in receivables and $400,000 in inventory means a line around $650,000 to $780,000. Term loans and SBA 7(a) are sized by cash flow at about 1.25 times coverage, and SBA 504 by the appraised value of the building. Run the [DSCR calculator](https://businessloanbroker.ai/tools/dscr-calculator/) on your last two years before you pick a number.

## What documents will you be asked for?

Manufacturing lenders want to see the balance sheet in detail, not just deposits:

- Two to three years of business tax returns and financial statements, reviewed or audited for larger loans
- Accounts receivable and accounts payable agings by customer and vendor
- An inventory report split into raw materials, work in progress and finished goods
- An equipment list with year, make, model and any liens, plus quotes for new purchases
- Customer contracts or purchase orders that show backlog
- A lease or deed and, for real estate loans, an environmental report
Asset based lenders add a monthly borrowing base certificate once the line is open. See the [document checklist](https://businessloanbroker.ai/guides/document-checklist/).

## What are the common uses of funds?

Manufacturing loans typically pay for one of these.

- New machinery: a $450,000 CNC machining center financed over seven years, with the production gain covering the payment.
- Working capital for a cash cycle: an asset based line that advances against invoices the day you ship.
- A building: an SBA 504 loan to buy the plant you have been leasing, with 10% down.
- A large order: purchase order financing for raw materials on a contract three times your usual size.
- Acquiring a competitor: see [buying a business](https://businessloanbroker.ai/situations/buying-a-business/).
- Refinancing equipment loans into one longer term to free up monthly cash.

## What usually gets a manufacturing application declined?

The most common reasons are two consecutive years of losses, a customer that makes up more than 40% to 50% of sales, and receivables that are mostly past 90 days. Lenders also decline on inventory that is aged or custom with no resale value, on environmental problems at the plant, and on a balance sheet where owner draws have stripped out equity. Equipment lenders decline when the machine is too specialized to resell or the vendor is unknown. The fixes are in [why loans get denied](https://businessloanbroker.ai/guides/why-loans-get-denied/).

## How to apply

Apply once here with your financial statements, agings and equipment quotes, and your application reaches equipment, asset based, SBA and term lenders together. If your controller would rather hand the work to software, connect your AI assistant to our MCP server through the [agents hub](https://businessloanbroker.ai/agents/): it can read your statements and agings, fill the application and submit it. It is free to the business, and offers come back to the same place for comparison.

| Product | Amounts | Typical cost | Speed | Best for |
|---|---|---|---|---|
| Equipment financing | $50,000 to $5M | 6% to 18% APR | 3 to 10 days | Machinery and production lines |
| Asset based lending | $250,000 to $20M | 8% to 18% APR | 3 to 6 weeks | Working capital that grows with sales |
| SBA 504 | $250,000 to $5.5M SBA portion | Fixed, near bank rates | 60 to 120 days | Buying or expanding a plant |
| Invoice factoring | Sized to invoices | 1% to 4% per 30 days | 2 to 5 days | Slow paying large customers |

## Questions and answers
**Can I finance used industrial equipment?**

Yes. Most equipment lenders fund used machinery from dealers, auctions and private sellers, usually with an appraisal or inspection for larger amounts. Terms are shorter on older equipment and the rate is a little higher. Very specialized machines with few buyers get lower advances because the lender cannot easily resell them.

**What is the difference between asset based lending and factoring?**

Asset based lending is a revolving line secured by your receivables and inventory, with you still collecting from customers. Factoring sells each invoice to the factor, which collects directly. Asset based lines are cheaper and fit plants with monthly financial statements. Factoring fits smaller or younger plants without that reporting.

**Should I use SBA 504 or 7(a) to buy my building?**

SBA 504 is usually cheaper for real estate and heavy equipment because the SBA portion carries a fixed rate over 20 or 25 years and the down payment is 10%. SBA 7(a) is more flexible when the deal mixes a building with working capital or a business purchase. Compare both in SBA 7(a) versus 504.

**Does customer concentration really stop a loan?**

Often. A lender sees one customer at half your sales as one phone call from a shutdown. Banks may still lend with a strong contract and a long relationship, but at a smaller amount. Asset based lenders cap the share of the borrowing base one customer can represent, often at 20% to 25%.

## Related
- [Equipment financing](https://businessloanbroker.ai/business-loans/equipment-financing/)
- [Asset based lending](https://businessloanbroker.ai/business-loans/asset-based-lending/)
- [SBA 504 loans](https://businessloanbroker.ai/business-loans/sba-504-loans/)
- [Purchase order financing](https://businessloanbroker.ai/business-loans/purchase-order-financing/)
- [Financing the purchase of a business](https://businessloanbroker.ai/situations/buying-a-business/)
- [SBA 7(a) versus SBA 504 loans](https://businessloanbroker.ai/compare/sba-7a-vs-504/)

## Apply
Apply for the business: https://apply.businessloanbroker.ai/signup?utm_source=direct&utm_medium=organic&utm_content=md-manufacturing
MCP server for AI agents: https://mcp.businessloanbroker.ai/mcp (docs: https://businessloanbroker.ai/agents/mcp/)