Guide to Business Loans for Manufacturers
What type of funding small businesses should you use?
How you should decide depends on what you want to accomplish. In general, there are three types of use of funds. For clarity, they’re technically stages or business cycle.
The three Modes for small businesses will determine what type of funding you’ll fall in to…
- Sustenance Stage – Capital would be to keep the business maintained and stable. Line a line of credit is a good example.
- Survival Stage – Capital is use to keep the company alive, declining sales or down turn cycle but doesn’t mean funding is illusive. You might still qualify for merchant cash advance and equipment financing.
- Growth Stage – Will your business need capital for growth line line of credit, equipment financing, term loans for project like marketing and expansion capital, and perhaps debt if you must accomplish all your options.
You may have a tough time getting a business loan during survival stage than growth stage.
Your Business Financing Options as a Business Owner.
Funding Stage | Who it’s best for | How to access funding… |
Business loans | Throughout the life of a business, leveraging access to funding should be utilized. | At least 2 years in business and good credit. You may have to provide collateral if you go to a traditional loan, and sign a personal guarantee. |
Business credit cards | For most small business, this appears on personal credit, therefore, you’re putting your personal credit in jeopardy. | Fair to good credit. |
Business lines of credit | Established businesses seeking to cover gaps in cash flow however you must be strong enough pass the survival mode. | At least 2 years in business and fair to good credit. |
Self-funding | A combination of cashflow through profit margin is the best way to gain capital leverage. | No qualification process. |
Friends and family | Business owners who have a circle of peers can be a blessing and curse. Family members have to trust you not to fail. | You credibility and reputation on the line. |
Equity investment | Startups or established businesses planning to expand. Rare to acquire. | Access to network of venture capital funds or other investment funds is crucial. |
Comparing Business Loan, Leasing, and Financing
Term Loans | Equipment Leasing | Equipment Financing | |
Ownership | 50% | 100% | 100% |
Initial Costs | $0 | Low to moderate | Varies |
Payment Type | Daily, Weekly | Monthly | Monthly |
Credit Minimum: | 500 | 600 | 650 |
Fund Disbursements | Client | Vendor | Vendor |
New/Used Equipment | n/a | Yes | Yes |
Maximum Term | 24 months | 60 months | 60 months |
Time in Business | 3+ years | Startup OK | Startup Ok |
Interest Rates | Moderate | Low | Low |
Application Only | $150K | $250K | S250K |
ONE APPLICATION MULTIPLE POSSIBILITIES!
Upgrades
Upgrade Hardware/Software & Office Furniture
Inventory
Ramp up on Inventory or stock up on supplies
Renovate or Relocate
Renovate or relocate your business
Payroll
Payroll, Sales and Federal Tax Dues
Web
Revamp Company Website.
Debt
Pay Off existing Cash Advances
This is not a cash advance.
Wide Range of Terms
Monthly Term up to 10 years (2 – 10 yrs available)
Tax Deductable
Express Financing for Approvals Up to $75,000
Builds Credit
Builds business credit
Large Funding
Business Loans up to $500,000 per Location
Fast Funding
Funding in 5-7 business days
Large Approvals
Approval based on debt ratio and cash flow.
We make it easy to grow your business
No Application Fee
No Switching Processor
No Additional Collateral Required
No Prepayment penalty
Two Types of Business Loans for Manufacturers
Your have various business funding options but they all have caveat. These can start from credit score, time in business, industry, use of funds and the lenders that’s involved.
Breaking down the types of business loans:
Equipment Financing Types for Manufacturing Companies.
When it comes to leasing equipment for your manufacturing company, two common types of lease agreements that you can expect are the Dollar Buyout Lease and the Fair Market Value (FMV) Lease. The new finance agreement that starting to be popular is the Equipment Financing Agreement.
Here’s a comparison of the two:
Dollar Buyout Lease
Definition: Also known as a $1 buyout lease, this type of lease allows the lessee to purchase the equipment at the end of the lease term for a nominal fee, typically $1.
Key Features:
- Ownership: At the end of the lease term, ownership of the equipment transfers to the lessee.
- Monthly Payments: Generally higher than FMV leases because the total cost includes the price of eventual ownership.
- Depreciation: Lessee can depreciate the equipment on their taxes since it’s treated similarly to a loan.
- Flexibility: Less flexible in terms of upgrading or returning the equipment before the lease ends.
Ideal For:
- Businesses that want to own the equipment at the end of the lease term.
- Those who prefer consistent, predictable payments.
- Companies that need equipment with a long useful life.
Fair Market Value (FMV) Lease
Definition: An FMV lease allows the lessee to use the equipment for a set term with the option to purchase it at the end of the lease for its fair market value.
Key Features:
- Ownership: The lessee does not automatically gain ownership of the equipment. They have the option to purchase it at its fair market value, return it, or renew the lease.
- Monthly Payments: Generally lower than a dollar buyout lease because the cost of ownership is not included.
- Tax Benefits: Lease payments are typically fully deductible as an operating expense.
- Flexibility: Offers more flexibility to upgrade, return, or extend the lease term.
Ideal For:
- Businesses that want lower monthly payments.
- Those looking for flexibility at the end of the lease term.
- Companies that may want to upgrade to newer technology frequently.
Comparison Summary
- Cost: Dollar Buyout leases have higher monthly payments but ensure ownership, while FMV leases have lower payments with flexibility at the end.
- Tax Treatment: Dollar Buyout leases allow for depreciation of the asset, whereas FMV leases treat payments as operating expenses.
- Flexibility: FMV leases offer more options at the end of the term (purchase, return, renew), whereas Dollar Buyout leases result in ownership.
Choosing between a Dollar Buyout Lease and an FMV Lease depends on a company’s financial goals, tax strategy, and equipment needs. If ownership is the primary goal, a Dollar Buyout Lease may be more suitable. If lower payments and flexibility are more important, an FMV Lease would be a better option.
Equipment Finance Agreement (EFA)
Equipment finance Agreement is a broader term that encompasses various financial products designed to help businesses acquire equipment. It can include both loans and leases clauses but often focuses on providing a means to equipment through retail financing type with an inherent equipment leasing contract language and features like the non-cancellable aspect of equipment finance agreement compare to retail finance agreement.
Key Features of Equipment Financing:
- Diverse Options: Equipment financing includes loans, leases, lines of credit, and more, tailored to different needs.
- Flexible Structures: Financing can be structured in various ways, allowing customization to fit a business’s financial situation.
- Ownership Potential: Depending on the type of financing, businesses may have the option to own the equipment.
Advantages of Equipment Financing:
- Customization: Financing solutions can be tailored to meet specific business needs, whether through leasing, loans, or other products.
- Ownership or Access: Businesses can choose between owning equipment or simply having access to it.
- Capital Preservation: Financing reduces the need for large capital expenditures, preserving cash flow for other business operations.
Disadvantages of Equipment Financing:
- Complexity: Navigating different financing options can be complex and may require professional financial advice.
- Variable Costs: Interest rates, fees, and terms can vary significantly depending on the financing method chosen.
Up to $1 million in as little as 24 hours
Our small business financing experts are available to guide you through the funding Process.
Instant Quote Online
Use our instant online quote calculator to get an accurate no obligation quote.
Apply Online
Complete our quick online application. Application takes 5 mins.
Review Your Options
We will contact you to review your options.
Get Funds
Money will be deposited in your account in as little as 24 hours.
HOW TO APPLY!
1. ONLINE APPLICATION: You can fill out our application, upload and authorized us to process your application. We do soft-inquiry, and our lender will do hard inquiries once you are approved for Equipment Financing only.
2. Equipment Invoice or Quote for the truck or equipment you want to buy. Multiple vendors accepted. We’ll lump them into one monthly payment for you. We’ll accept bill-of-sale for some private sale.
3. Banks statements (3-4 months) – Proof income, proof of banking, and proof funds availability in case down payment is needed and to match for ACH Payment Drafting – as an auto pay.
Are you an Equipment Vendor??
If you sell new or used trucks, trailers or machinery including medical equipment, we’d love to partner with you to offer highest approval rate for your clients. Our goal is to get them approved no matter what their credit profile might be. Working with Liberty Capital will give you a wider credit window so you can stop shopping for your clients. We do soft-inquiry for each applicant.
1. Check out how you can grow your vendor business using our financing options. View our credit guidelines here.
2. Download our equipment vendor package here.
All we need from your clients is a simple application.
1. ONLINE APPLICATION: You can fill out our application, upload and authorized us to process your application. We do soft-inquiry, and our lender will do hard inquiries once you are approved for Equipment Financing only.
2. Equipment Invoice or Quote for the truck or equipment you want to buy. Multiple vendors accepted. We’ll lump them into one monthly payment for you. We’ll accept bill-of-sale for some private sale.
3. Banks statements (3-4 months) – Proof income, proof of banking, and proof funds availability in case down payment is needed and to match for ACH Payment Drafting – as an auto pay.
Business Loans for Start Ups!
Credit Requirements for Startup Financing:
For startup companies, we require: Credit requirements Varies depending on the types of business loan. Here’s how you get your ducks in a row to make sure you make it easy for the lender approve you.
Ø Business license or active business entity registration.
Ø Personal guarantees from all owners – history matters.
Ø Minimum 650+ credit score.
Ø No bankruptcies in the last 7 years.
Ø No unresolved tax liens.
Ø No judgments, or repossessions
Ø Sufficient networth
Pre-revenue Start up – obviously no revenue yet. So, it’s difficult to get working capital or cash advance loans due to the fact that they base their decision on annual sales. Pre-revenue has limited option and one of the option that’s suitable type of funding for pre-revenue startup is equipment loan, equipment lease that’s not as hard process as SBA loan. You can qualify for an SBA loan as a start up but you have to have down payment, collateral or all your financials, projections, budget and master plan ready to go with it. Do you?
Post-Revenue Start up. – Post start up sales give you more options than a pre-revenue start ups. Now you’re eligible to get term loan, MCA, equipment financing and even SBA.
Contact us to get started! Apply for a start up loan here.
