First Published: Sept. 8, 2019
So Many Options… What Fits Best?
There are many different sources of financing for manufacturing companies who have a proven track record of success. However, many are unable to find the correct form of financing that fits their working capital needs. These are typically the start-ups, the companies who have experienced recent losses or companies who have weak balance sheets with high leverage or low net worth.
With start-ups, banks want to see a history of positive operating performance. They may also want to see principals with strong personal credit scores within their established business boundaries. This is difficult for start-ups because if the principal’s score is too low, the chances of the loan request being accepted drops tremendously.
Manufacturing companies who have an established relationship with a bank may be asked to seek alternative financing if they have suffered recent losses and have violated their covenants. Only a select few are even given the chance to rehabilitate and stay with the bank. If this happens, banks begin to limit its exposure with the company and start to refuse future loan requests. The relationship between the bank and the company becomes strained and is eventually broken.
The Working Capital Issue
In both cases, the manufacturing companies don’t have access to a reliable line of working capital. Without a line of capital, it can be incredibly difficult for the company to buy the necessary inventory, fund employee payroll and benefits, purchase and update equipment, and even pay daily operating expenses. This usually results in lost business opportunities, and even worse, having clients leave the company for a company who can complete their purchase orders (POs). The company’s management team needs to prepare for these events by having the resources on hand to complete their POs and meet delivery schedules in a timely fashion.
This is where an asset-based lender can be of great value to manufacturing companies in need of working capital. These lenders bridge the gap between the banks and companies by providing the working capital needed before banks provide the loan. Hitachi Business Finance has seen one too many pre-bankable companies with assets that can be easily leveraged get turned down by banks. The flexible line of credit Hitachi Business Finance can provide helps business owners manage the ups and downs of their company’s life-cycle more efficiently.
Think asset-based lending is right for your manufacturing company? Contact us at (248) 658-1100 or firstname.lastname@example.org to get started.