Manufacturing Loan

Find out all about the different manufacturing loan options that can be used to meet your business needs.

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What are common funding needs of manufacturing businesses?

Manufacturing companies are organisations that use components and raw materials to produce goods for sale to end consumers, as well as wholesalers and retailers. Manufacturing businesses span across diverse industries - from chemical and metal manufacturing, to food and textile production.

A manufacturing loan can cover a wide range of expenses related to running your venture. These include:

Invest in technology

In a landscape where technological advancements occur rapidly, manufacturing businesses need to be agile and adaptable in order to keep ahead of industry trends. One such example would be the latest industrial revolution. Termed Industry 4.0, it refers to the digitisation of the entire manufacturing process, creating “smart factories” that feature IoT devices and manufacturing automation.

For smaller companies with thinner resources, external financing options can serve as a handy measure for covering the costs of integrating these technologies.

Purchase equipment and machinery

Having the right equipment can help streamline your processes, and improve your productivity and bottom line. Cost-heavy manufacturing equipment generally require external financing, and you’ll need to assess your needs, and weigh out the pros and cons of different equipment financing options before deciding on a solution that works best for your business.

Growth and expansion

With external financing, you’ll be better positioned to capitalise on expansion opportunities - whether that’s setting up a new manufacturing unit, taking on larger scale projects or manufacturing additional items - rather than passing on due to insufficient funds.

Cover cash flow gaps

Working capital challenges aren’t uncommon for manufacturing business, as you’ll often need to cover supplier and production costs before receiving payments from customers. But the problem is further exacerbated when you encounter seasonal fluctuations, overtrading, have lengthy payment terms or are holding too much stock on hand. Under these circumstances, it can be helpful to tap on flexible financing options, such as a line of credit to cover cash flow gaps.

Purchase raw materials and inventory

Upfront costs for raw materials and inventory can add up rapidly - yet it can take months before you receive payment from your customers. Without sufficient capital on hand to ramp up production, you could risk missing out on time-sensitive business opportunities. Here’s where manufacturing loans, such as a line of credit or invoice financing can come in handy.

What are common types of manufacturing loans?

Invoice financing

Invoice financing is a short-term financing option that enables businesses to borrow based on their unpaid invoices. It’s a great option for manufacturing businesses, as long payment terms - which can range between 30 to 120 days - are common in the industry. With invoice financing, you can free up cash tied to unpaid invoices to fund immediate business needs.

Line of credit

A line of credit, also commonly known as revolving credit provides borrowers with access to a pre-approved sum of capital. You can draw from this sum as and when you need, and interest is charged only on the amount that is drawn.

Flexible and convenient, it’s a financing option that lends itself to a variety of manufacturing business needs - such as funding upfront production costs, cash flow gaps due to seasonal fluctuations and expansion activities.


Secured loans require that borrowers pledge assets as a collateral for the loan. Should the borrower default on the loan, the lender may sell off the assets to recover the amount owed. Invoice financing, equipment loans and lines of credit are examples of secured loans obtained by manufacturing companies.

Asset leasing and hire purchase

A lease refers to an arrangement between the lessor (owner) and the lessee (user of the asset), where the lessor purchases an asset for the use of the lessee, in exchange for lease payments. In a hire purchase agreement, the hirer (user of the asset) makes payments to the vendor for the use of the asset.

One key difference between the two arrangements is that at the end of a lease, the asset is returned to the lessor (owner), while in a hire purchase agreement, the hirer (user) is given the option of acquiring ownership of the asset. Apart from the ownership, these two arrangements also differ in terms of upfront payments, depreciation claims, debt levels and types of assets involved.

Tips to help you prepare for a manufacturing loan application

For small businesses, obtaining external financing can often be a struggle - but with the right tips and tactics, you’ll stand higher chances at securing the loan you need:

Line of credit: Get it before you need it

While it may seem contradictory, it’s best to apply for a line of credit is when you don’t actually require it.

That’s because you’ll be better positioned to negotiate for more favourable terms - such as a higher limit, lower interest rates and a more accommodating repayment time frame - rather than when you’ve encountered cash flow issues. A good time for making your application would be when you’re experiencing revenue growth for three to six months, and have a strong credit score.

Highlight your past successes and current business plans

Rather than focusing solely on future projections and your longer-term strategies in your loan application, it can be helpful to highlight projects that you’re currently working on, along with activities that have proved successful for your business and how you’ll be using your loan to fund these strategies.

This can be an easier way to demonstrate to potential lenders that you’re a good investment, as opposed to conveying the long-term potential of your venture - which can differ vastly from where you currently are.

Having a well-managed online reputation is key

Your online reputation is a way for potential lenders to assess if it’ll be a positive experience to work together; they’ll want to know that you and your partners are trustworthy, likely to make timely payments, demonstrate business acumen and be responsive to the needs of your customers.

They’ll often do do check up on Google for your social media profiles and websites, so taking steps to keep these platforms up-to-date, provide prompt responses online and monitor your reviews regularly can go a long way in ensuring a successful loan application.

Where can I get a loan for my manufacturing business?

Stringent lending requirements, such as having an operational history of three years, a minimum annual revenue of at least $200,000 and an average daily balance of $10,000 to $20,000 maintained in your bank account are typically imposed by traditional lenders.

Coupled with a strict credit assessment process, the odds are stacked up against small businesses seeking external financing. As indicated in a 2015 study by Visa and Deloitte, 40 percent of Singapore SMEs were unable to gain access to bank loan financing.

With online lending platforms like Aspire, loan application processes are convenient, streamlined and speedy - submitting an application takes a matter of minutes, and you’ll be notified of your loan approval status in just 24 hours.

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