Manufacturing is an essential part of the American economy, yet many manufacturers find it difficult to secure traditional financing.
It is especially hard to get funding when you need it most … before the work starts.
Manufacturing's cash flow crunch
Every new order comes with upfront costs of labor, materials, supplies, etc., that you have to cover before you send an invoice.
Traditional lenders often won’t finance manufacturers. How are you supposed to cover those costs?
Once you complete the work, you still have to wait 30 days after you send an invoice before you see payment.
In the manufacturing industry, cash flow challenges are a constant battle. Each new order is both an opportunity and a financial burden. Before you can even think about generating revenue, you’re faced with significant upfront costs—everything from raw materials to labor and other necessary supplies. These expenses need to be paid out before any product rolls off the assembly line, putting pressure on your available cash reserves. The gap between incurring these costs and receiving payment for the finished product can strain even the most well-managed businesses, making it difficult to take on new orders without additional funding.
Securing financing as a manufacturer can be challenging. Traditional lenders often shy away from financing manufacturing operations due to the perceived risks involved. The industry's cyclical nature, combined with the high upfront costs and the time it takes to produce and sell goods, makes it difficult to obtain loans from conventional banks. This leaves many manufacturers in a tough spot, scrambling to cover costs without the support of traditional financing options. Without access to necessary funds, your ability to grow and take on new business is severely hampered.
The challenges don’t end once the product is made and shipped. In many cases, manufacturers have to wait 30 days or more after sending an invoice to receive payment. This delay can be particularly painful, as it means even after you’ve covered all the upfront costs and delivered the product, there’s still a significant gap before you see any cash come in. This waiting period can create a cash flow bottleneck, where your resources are tied up in completed work while new orders are waiting. This delay makes it even more challenging to manage day-to-day operations, pay your employees, and invest in future growth.
Two ways to beat the cash flow pinch that comes with new projects
We understand the unique cash flow dynamic that manufacturers work in. That’s why we offer two funding options designed for your industry.
Purchase Order Financing
What Is Purchase Order Financing?
Purchase order financing is an ideal solution for construction and manufacturing companies that receive large orders but don’t have the upfront cash to fulfill them. Whether you’re a contractor who just landed a big project or a manufacturer needing to supply custom components, purchase order financing allows you to keep the ball rolling without dipping into your reserves. With this financing, the funds you need to pay suppliers or purchase materials are provided directly by a financing company. Once your client pays for the completed project, you repay the financing, along with any agreed-upon fees.
How Can it Help?
- Keep Your Projects on Track: Don’t let cash flow issues slow you down. Purchase order financing gives you the capital to start or continue projects without delay.
- No Additional Collateral: Your purchase order secures the financing, so you don’t need to put up other assets.
- Quick and Easy Access to Funds: Get the cash you need quickly to meet tight deadlines and take on bigger jobs.
- Fuel Your Growth: Take on more or larger projects without worrying about upfront costs, helping your business grow.
Who Should Consider It?
- Small Construction Firms: Companies that are growing but may not have the capital to take on large projects immediately. Purchase order financing allows them to bid on and secure bigger jobs without worrying about upfront costs.
- Boutique Manufacturers: Small manufacturing businesses that specialize in niche products and need to fulfill larger orders that could otherwise strain their limited resources.
- Specialized Contractors: Contractors who provide unique services or products and need to buy specific materials for a job but don't have the cash flow to cover it upfront.
- Small Suppliers in the Construction Sector: Smaller suppliers who want to fulfill large orders for their clients but need the capital to purchase materials.
Examples of Use:
- Small Commercial Building Projects: A small contractor who has been awarded a contract to build a local business office and needs to purchase the necessary materials without depleting their cash reserves.
- Niche Product Manufacturing: A boutique manufacturer that has received a large order for custom-made components and needs financing to cover the material costs.
- Renovation Projects for Small Businesses: A contractor specializing in renovations for small businesses needing to purchase high-quality materials for a unique project.
- Supplying Local Construction Projects: A small supplier who needs to buy in bulk to fulfill a large order for a local construction project but requires financing to do so.
Work and Progress Financing
What Is Work and Progress Financing?
Work and progress financing is designed for construction and manufacturing companies working on long-term projects where payments are tied to specific milestones. This financing solution gives you the cash you need to keep the project moving, covering ongoing expenses like labor, materials, and equipment. It’s particularly useful when client payments are staggered or delayed, ensuring you have the funds to meet your commitments and keep your project on schedule.
Why It’s Beneficial:
- Commercial General Contractors: General contractors managing multi-phase projects that might span several months but lack the cash flow to cover the ongoing costs until the next payment milestone is reached.
- Paying subcontractors early
- Labor shortages and giving sub contractors TOO much work -> get money moving in a faster, protected way for you to get that money moving for the subcontractor
- Funds are kept on the project specifically
- Custom Manufacturers: Small manufacturers working on made-to-order products who need funds at each stage of production to keep the project moving.
- Specialty Construction Firms: Smaller firms that handle complex projects, such as custom home builds or specialty renovations, where payments are tied to specific project milestones.
- Independent Project Managers: Project managers overseeing smaller-scale projects who need to ensure that funds are available to keep the work on schedule without relying on client payments.
Who Should Consider It?
- Small-Scale Infrastructure Projects: A small contractor working on a local infrastructure project, like a neighborhood road, where funding is needed at various stages of completion.
- Made-to-Order Manufacturing: A small manufacturer producing custom products in stages, requiring financing to cover the costs of each production phase.
- Specialty Renovation Projects: A contractor working on a high-end renovation that requires continuous investment to reach each milestone, with payments scheduled for each completed stage.
Examples of Use:
- Custom Home Construction: A small construction company building custom homes, needing to finance each phase of the project as it's completed to keep the build progressing smoothly.
- Small-Scale Infrastructure Projects: A small contractor working on a local infrastructure project, like a neighborhood road, where funding is needed at various stages of completion.
- Made-to-Order Manufacturing: A small manufacturer producing custom products in stages, requiring financing to cover the costs of each production phase.
- Specialty Commercial Renovation Projects: A contractor working on a high-end renovation that requires continuous investment to reach each milestone, with payments scheduled for each completed stage.
- Tenant improvement
- Commercial
- Bonded Government Projects or Specialty Services: Contractors working on government-backed or specialty projects that require bonding, where financing ensures timely completion of each contractually defined stage.
Success starts with cash flow
How much profit is that new project making you, and when will you earn it?
Are you sure about your answers?
Use our Cash Flow Estimator to make sure you’re making the margin you need, when you need it, and (hopefully) with enough left over to make the job profitable.
“You guys totally understand who we are and what our needs are.”
Isaac Duostar, CEO of luxury color cosmetic brand Doucce, saw the opportunity for an e-commerce makeup brand during the coronavirus lockdown. He utilized Mobilization Funding's financial services to capitalize on the opportunity and grow the business when many cosmetic brands' sales were stalled or shrinking.
