Manufacturing business loans

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 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 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.

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.
• 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.

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: 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.