Types of Business Loans For Manufacturers

Manufacturing refers to a process by which raw material or secondary product is used by the company either to make a good to be used by another business or finished goods for sale. The finished product is then sold in a market. More often than not manufacturing of finished goods is an expensive process. Funds are required to purchase raw material, for buying and maintaining machinery, paying the employees and transportation etc. Financing is required to meet these expenses. Some of the most common financing options for the manufacturers are as follow:

  • Unsecured business loans 

Unsecured business loans as the name suggest are not secured, but as there is nothing in the form of collateral, most banks charge a high rate of interest. In addition to this, banks approve the loans based on credibility, turnover and other factors.

The high rate of interest charged on the unsecured loans makes the loans expensive, and sometimes the manufactures are caught in the vicious circle of failing to make payment and thus paying the higher amount due to the penalty.

  • Small Business Administration loans 

A manufacturing company has a significant role in an economy, not only they provide goods for their own use but also supply goods for the end product of the other company. Government is mindful of the critical role played by the manufacturers and supports them so that they can contribute towards the economy. 

One such initiative is SBA loan or Small business loans, the Government does not provide this loan but provides direction to the manufacturers to take loans from the banks. SBA loan helps manufacturing companies in a significant way. However, this loan involves considerable paperwork, and banks are too much concerned about the credibility, turnover of the company. Thus, it becomes difficult to get this loan approved.

  • Equipment financing:

To exist and flourish in the market, updating technology becomes imperative for a Manufacturing company. Equipment financing helps in meeting the need for introducing the often costly technologies. There is no need for collateral or any security to be pledged by the manufacturing company. This is because of the machinery loaned or leased in this case by itself is the collateral. 

Also Read: Comparison Between Mudra Loan And Business Loan

  • Microloans

Microloans, as the name suggests, are loans of comparatively smaller amounts. They may be used by the manufacturing firms to train employees, renovate the place or other such purpose. As the loan amount is low, most banks offer this loan at lower rates, but this loan cannot serve the purpose of big finance for expanding business or purchasing costly technologies.

  • Business credit cards

Business is like an ocean, it can be serene and calm at times, and it can turn into a disaster in no time. To face the unforeseen circumstances and sail through the disaster business needs funds at the time of emergency. Business credit cards help in meeting unforeseen circumstances.

  • Invoice financing

When a manufacturer offers primary material another business that has to manufacture the output, there arises a situation wherein one can’t pay off the invoices provided by the other. For such cases, this invoice financing will help in paying off the debts and assists the .businesses