Top 5 Loans for Manufacturers and Distributors
There are multiple types of small business lending options that manufacturing business owners can tap into. Navigating all the different loan types and financial terms can feel a bit overwhelming. We strive to make the process simple and transparent. Having funded thousands of businesses, where are the types of loans we recommend to manufacturing business owners:
1. Equipment Loans for Manufacturing: Best for Financing Machinery and Hardware
The success rate of manufacturers has a direct correlation to their equipment. If your machinery breaks down, business will come to a grinding halt. It's also one of the biggest expense for most business owners.
An equipment loan lets you finance up to 100% of the cost to purchase, upgrade, or repair equipment. Buying new technology or upgrading old machines can improve efficiency and output -- which will have a positive effect on your bottom line ROI.
2. Invoice Factoring for Manufacturing: Best for Improving Cashflow
Almost every manufacturer has cash flow tied up in unpaid invoices and trade credits at some point. Invoice factoring (also known as invoice financing) lets you get your money upfront from a lender by using the unpaid invoices as collateral.
Factoring has an additional benefit: your personal credit score is not a concern since the lender would instead look at the credit rating of the business that owes you money on the invoices. The factoring process also only takes 1-2 days.
3. Short Term Loans for Manufacturing: Best for Immediate Capital Needs
Term loans provide your business with a lump sum infusion of cash. You get approved by Clarify for a set loan amount at a fixed interest rate that is paid back over a specified term length. We tailor the term loan to fit your specific business needs to help you achieve your goals.
Interest rates for term loans start as low as 7% and have a term length of up to 2 years. There is no collateral needed to get approved for a short-term loan through our marketplace. Funds raised with a term loan can be used for any type of business expense.
4. Business Line of Credit for Manufacturing: Best for Growth Opportunities
In an ideal business scenario, you want to have access to working capital to jump on opportunities -- instead of trying to fix emergencies. A business line of credit allows you to withdraw funds from a credit line when needs arise.
A business line of credit is a hybrid funding solution that is between a credit card and a term loan. Clarify approves you for a set credit limit that is always available for you to use for business expenses. You only pay interest on amounts that are utilized, thus being a cost-efficient type of funding.
5. SBA Loans for Manufacturing: Best for Excellent Credit Scores
SBA loans are provided by lenders approved by the Small Business Administration. They are lump sum loans similar to term loans -- with the key difference being that they are partially guaranteed by the federal agency up to 80%. In order to qualify for an SBA loan, you need to have an excellent credit score and go through a lengthy paperwork process. As such, SBA loans are only recommended for manufacturers who are not in urgent need of funding.