What funding is usually needed by manufacturing companies?
Manufacturing companies use components and raw materials to make finished products which are then sold to consumers, including wholesale and retail. Companies manufacturing have diverse businesses – ranging from chemical products to metal to food and textiles.
Loans for manufacturing businesses can be used for various business purposes, including:
With the rapid growth of technology, manufacturing businesses must adapt to keep up with industry trends. An example is an industrial revolution called industry 4.0 which is a digitization of the entire manufacturing process, creating a “smart factory” that requires IoT and automation.
For small companies with minimal funding sources, external funding is needed in order to meet this technological need.
Buy machinery and equipment
With the right equipment can help your production process faster. Expensive manufacturing tools usually require external funds, you also need to check the needs and advantages and disadvantages compared to other tools before deciding on the best solution for your business.
Business growth and expansion
You have the opportunity to expand your business using external financing. For example adding units or taking projects on a large scale.
Covering the cash flow gap
Having capital problems is not unusual for manufacturing businesses, you certainly need to cover payments to suppliers and production costs before getting paid by consumers. The problem increases even more if there are sales fluctuations, and high trade demand while the product has not been paid from consumers, or there are many stocks in the warehouse that have not been sold. In these circumstances it will be easy if you get flexible funding such as a line of credit to cover the cash gap.
Buy Raw and Stock Materials
Upfront costs for raw materials and supplies can increase rapidly – not to mention you have to wait a long time to get paid from consumers. Without enough capital in your hands to increase production, you can lose a number of project opportunities. If so, loans such as credit lines or factoring can be utilized.
What types of loans are available for manufacturing companies?
This loan is a short-term loan that allows entrepreneurs to borrow a certain amount of money based on invoices that have not been paid to him. This is a lucrative loan choice, moreover the payment term can range from 30 to 120 days. With factoring, you can get funds from delinquent invoices quickly for your business capital again.
Also called revolving credit, allows borrowers to get a number of approved capital. You can withdraw it whenever you need it, and pay interest according to the amount withdrawn.
This loan is convenient and flexible, can be used for various needs – such as paying a down payment for production, overcoming the gap in cash flows due to business fluctuations or to expand the market.
Loan with guarantee
Borrowers must submit assets as collateral. If the borrower cannot pay the loan, the asset can be sold by the loan provider to cover the unpaid shortfall. Examples of this type of loan are loans for equipment and credit lines.
Leasing tools and leasing to buy
Leasing means an agreement between the owner (lessor) and the borrower (user of the asset / lessee), the lessor buys or pays the asset which is then used by the borrower, instead the borrower must pay it every month. In a lease agreement, the asset user (hirer) pays a sum of money to the vendor to use the asset.
The difference is, in the leasing agreement, the asset user can return the tool to the lessor, while the lease purchase agreement, the user has the asset if the payment has been paid off. In addition to ownership, these two agreements also differ from payments for advances, claims, debt levels and types of assets.
Tips to help you prepare loan applications
For small companies, getting external funding is difficult – but with the right tips and tactics, you can have a greater chance:
Credit line: get it immediately before it is really needed
Maybe this sounds implausible, the right time to apply for this type of loan is before you really need it.
That is because, you are in a good position to negotiate – because you will get a higher limit, lower interest and a better payment time – than if you submit it when you have financial problems. A good time to apply for a loan is when you have a good business development in three to six months and have a good credit score.
Highlight your past successes and your current business plan
Instead of focusing on future projections and long-term strategies, it will be more helpful if you show the project you are working on, as well as the project or achievements you have succeeded in doing, and how you will use the loan.
If you have long-term business potential, it will be easier to give a picture to prospective lenders that you are a good investment.
Having a good online reputation is important
Your online reputation is one of the considerations for prospective lenders that you are a partner you can work with, they will make sure you and your colleagues can be trusted, can pay on time, and be responsive to the needs of consumers.
Usually lenders check on search sites like Google for your social media profiles and websites, so make sure everything is updated and provide a positive online response.
Where can I get a loan for a manufacturing company?
Difficult loan terms such as having a three-year operational history, a minimum annual sales value of IDR 2,000,000,000 and an average daily balance of IDR 100,000,000 are often asked by conventional providers before approving your application.
At the same time, there are low opportunities for small companies to get loans. Like the 2015 research by Visa and Deloitte, 40% of SMEs were difficult to get loans from banks.
With online loan services such as Aspire, applying for a loan is easier, more convenient and faster – sending a request in minutes and you will be informed of the loan status in 24 hours.