Manufacturing Business Loans: Flexible Financing for Growth
In the ever-changing world of manufacturing, business loans represent critical resources that help your company stay afloat and (hopefully) ahead of the competition.
Manufacturing business loans come in all shapes and sizes. They are designed to provide you with the capital you need when you need it. You might use the funding to make equipment purchases, or just keep your operations running smoothly during seasonal dips and low cash flow cycles.
In this article, we'll explore some common loan options available for businesses in the manufacturing industry. We’ll also look at the financial tools that can help you navigate challenging economic landscapes, invest in new manufacturing equipment, and sustain competitive growth.
What Are Manufacturing Business Loans?
Manufacturing business loans are specialized financing options designed to meet the business needs of the manufacturing sector. Whether you’re looking to upgrade equipment, expand production capacity, or support business operations during a slow period, these loans can help maintain your business’s financial health when you need it most.
Unlike traditional bank loans, manufacturing financing options are flexible enough to meet the complex needs of companies operating within this landscape. They provide essential financial support to help sustain and grow successful manufacturing businesses, offering targeted solutions to help borrowers stay competitive.
Why Many Manufacturing Business Loans Target Small Businesses
The majority of manufacturing businesses are small, so most manufacturing business loans take this into account. According to the National Association of Manufacturers, over 98% of manufacturing firms in the U.S. are considered small businesses, meaning they have fewer than 500 employees, and 75% of these operations have fewer than 20 employees.
However, the trend toward small businesses doesn’t equate to low revenue. In fact, the U.S. manufacturing industry added $2.6 trillion to the economy in 2022.
Financial and Operational Challenges Faced by Manufacturing Firms
As a small business owner in the manufacturing industry, you’re faced with a complex, ever-changing landscape that can present challenges on a regular basis. These obstacles call for accessible solutions and strategic thinking to navigate successfully, especially since manufacturing companies in today’s climate face rising interest rates and operational costs as well as weaker demand.
The pressures faced by manufacturing businesses go beyond basic cash flow concerns. Your company may also have challenges like:
Complex global supply chain demands
Labor market fluctuations
Changing demands from consumers and customers
Deloitte’s 2025 Manufacturing Industry Outlook predictions indicate that manufacturing operations will continue to face an unstable business environment due to potential policy changes and higher costs. This report also highlighted ongoing supply chain disruptions into 2025, potential shipping delays, and elevated operating expenses. That’s in addition to the cost (and necessity) of investing in the latest digital technologies.
Furthermore, the cost of complying with federal regulations is often disproportionately high for small businesses in the manufacturing sector. For example, U.S.-based manufacturing companies with fewer than 50 employees incur an estimated cost of $50,100 per employee each year. To compare, firms across all industries pay average annual federal regulation fees of $12,800 per employee.
Luckily, financial options can mitigate the issues of equipment upgrades, raw material costs, and workforce management expenses. There are several different types of equipment financing and working capital loan options available to help each manufacturing firm find the right fit for its unique needs.
Overview of Common Manufacturing Business Loan Options
Just as your manufacturing company faces diverse challenges, you have access to a wide range of financing options designed to meet the needs of the industry. Manufacturers require solutions that are flexible enough to work with the ups and downs of the industry.
Manufacturing business loans can be the difference between surviving and thriving, so understanding these loan types is a must for small businesses that need assistance managing cash flow, upgrading to new technologies, and driving lasting growth. Each financing option represents a tool that companies can use to overcome operational hurdles and stay ahead of the competition.
Each option can be strategically employed to support businesses at different stages of development with varying operational demands. If you’re the owner of a manufacturing business, we recommend leveraging financing options like those highlighted below. When used in conjunction with careful strategies, these loan options can be exactly what you need to drive long-term growth and stability for your manufacturing company.
1. Working Capital Advance
Working capital advances allow your business to borrow money and pay it back over a short period with daily, weekly, or bimonthly payments.
These short-term funding solutions can help manufacturing businesses manage their cash flow during slow periods and pay for daily operational expenses. They also offer increased flexibility for financial needs like payroll, inventory, real estate fees, and other immediate operational requirements a manufacturing company might face.
With a working capital advance, you get quick access to the money you need to navigate unexpected expenses and seasonal fluctuations with greater confidence.
2. SBA Loan
A small business administration (SBA) loan refers to government-backed financing options that are similar to traditional bank loans but tailored specifically to small businesses. The most common option is the SBA 7(a) loan program. The 7(a) loan can be used to refinance existing loans, cover real estate fees, provide short- and long-term working capital, and purchase, install, or repair equipment.
3. Business Line of Credit
Business lines of credit are similar to business credit cards in that they’re flexible financing options with a predetermined limit from which you can borrow as needed. Like a credit card, you only pay interest on the funds you’ve used instead of the total available credit. This arrangement makes business lines of credit quite useful when companies need to smooth out fluctuating cash flow or handle unexpected expenses.
Business lines of credit are also useful for addressing supply chain and inventory issues, making them a popular manufacturing financing option. They can serve as a safety net, allowing you to immediately respond to unexpected expenses.
4. Invoice Factoring and Financing
Invoicing factoring and invoice financing are two financing options that allow you to turn outstanding invoices into upfront cash. This makes it easier to manage receivables and short-term cash flow instead of waiting on outstanding invoices to be paid over longer periods of time.
While invoice factoring and financing are similar, they represent two distinct options, both of which can help bridge gaps between product delivery and payment. Here’s a quick overview of both choices:
Invoice factoring: Also known as accounts receivable factoring, this option allows you to sell your outstanding invoices to a factoring company at a discount. You receive upfront cash in exchange for giving up part of the invoice amount to the factoring company. This option is a sale instead of a loan, so it won’t impact your credit or require monthly payments like a financing option would.
Invoice financing: Also known as accounts receivable financing, this option allows business owners to borrow money against unpaid invoices. Unlike invoice factoring, invoice financing does not involve a direct sale. Instead, business owners pay a percentage of the invoice amount to the lender as a borrower’s fee, and in exchange, they receive capital faster than if they had to wait for the customer to pay the invoice in full.
Both options — invoice financing and invoice factoring — provide the chance to turn unpaid invoices into profits. For this reason, they may be helpful for manufacturing companies experiencing cash flow challenges or sudden demands. The trade-off, however, is accepting a smaller payout, which can take a toll on your bottom line in the long run.
5. Equipment Financing
Equipment financing does exactly what it sounds like – it allows you to purchase or lease new equipment. The lender typically uses the equipment itself as collateral against the loan amount, providing a layer of security should the borrower default. Because of this security, providers may offer lower interest rates or longer repayment terms in some cases.
Equipment financing can be a great option if you need to replace old equipment, boost your production efficiency, upgrade your technological capabilities, or even expand into new markets.
Eligibility Requirements for Manufacturing Business Loans
Exact requirements vary between lenders and the type of financing, but there are often shared factors that go into determining eligibility. For example, these are the qualifying factors for Backd’s lending options:
Monthly revenue: Minimum of $100,000 consistent business revenue
Credit requirements: Personal credit score of 625 or higher with an established business credit history
Business fundamentals: Based in the U.S. with a permanent physical address (brick-and-mortar location)
Operating years: Minimum of one year in operation for working capital advances and two years for business lines of credit
In addition to these qualifying factors, some lenders have additional considerations that will come up during the application process for manufacturing business loans. For example, you may need:
Proof of financial stability and consistent cash flow
Comprehensive business documentation
In good standing with current and previous financial obligations
Apply for Manufacturing Business Loans With Backd
The most important parts of securing financing for your manufacturing company are the financing option and the lender. Getting these right can be the difference in achieving long-term success.
Look for a provider with manufacturing business loan options and repayment terms that fit what your business needs, and don’t be afraid to shop around until you do.
If you own a U.S. business that meets our eligibility requirements, you can access flexible payment options, such as a:
Business line of credit of between $50,000 and $750,000
Working capital advance of between $25,000 and $2,000,000
Most Backd applicants receive a same-day decision and get funded within 24-48 hours. Apply today.
