What is Manufacturing Finance?
Establishing and running a business in the manufacturing sector involves heavy overheads and operating expenses. Machinery is expensive to acquire, requires expert maintenance and may also need periodic upgrades. Manufacturing finance solutions are designed to help businesses handle these challenges.
How Does Manufacturing Finance Work?
Here’s a quick overview:
If you’re looking to fund new manufacturing equipment, bridge a gap in cash flow, start up a new business or grow an existing one, you have several choices.
Business loans:
For a secured loan, you’ll use an asset of your own as collateral. Secured loans usually have lower interest and a higher borrowing limit compared to unsecured loans, which allow you to borrow without offering collateral. A personal guarantee may be required for an unsecured loan.
Asset finance:
This is a way to buy or rent expensive manufacturing equipment without paying a significant sum of cash up front. The lender buys the asset and you make fixed monthly repayments for a term of up to five years. These payments include interest and VAT.
Refinancing:
Release equity that’s tied up in your existing equipment by selling the asset to the lender and leasing it back from them.
Invoice finance:
Assign outstanding invoices to a lender who will advance you 70%–90% of the invoice value right away. When the client pays, the lender forwards you the remainder, minus their fee.
How can I use manufacturing finance for my business?
You can apply for financing to fund any aspect of running your business, including:
Buying or renting premises
Fitting out a factory, shop, office or warehouse, including HVAC and dust extraction
Renewable energy equipment
Plant and machinery
Vehicles
Hiring and paying staff
HR, legal and administrative costs
Stock and raw materials
Running capital
Tax and VAT payments
Manufacturing finance is suitable for businesses in any manufacturing subsector, regardless of scale. Some lenders offer solutions for startups, businesses that aim to reduce their carbon footprint and those that have been badly affected by the COVID pandemic.
How can I get approved for manufacturing finance?
Lender requirements will depend on the nature of your company, how long you have been in business and the amount of funding you’re applying for. At the minimum, you will need to undergo credit and security checks and supply a detailed business plan, income and account statements, balance sheet, and cash flow forecasts.
Many specialised manufacturing business loans are intended for established, UK-based limited companies only. These will require you to have a minimum of 12 months’ trading history and a certain monthly turnover in order to apply.
Some forms of manufacturing finance have a shorter processing time than others. Invoice finance and smaller, short-term business loans are often approved and paid out quickly, while larger, long-term loans and asset finance plans may take longer. In this case, the loan amount will usually be released in installments.
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Access tailored funding to support machinery purchases, production expansion and operational growth.
Whether you’re upgrading equipment, increasing capacity or improving efficiency, structured manufacturing finance helps protect cash flow while driving long-term performance.