Manufacturing has picked up steam over the past few years, providing goods to businesses in every sector, as well as direct consumers. The increased demand has presented a number of growth opportunities to manufacturers of all sizes, and every decision must take finances into consideration. Whether the concerns are cash flow, working capital, or equipment, manufacturers need a sound finance strategy to maintain and grow operations now and into the future.
Working Capital for Manufacturers
Working capital is a big concern for manufacturers of all sizes. Capital is not just needed to make payroll and cover regular overhead expenses, capital is needed to purchase materials for large and special orders. Since the majority of invoices issued by manufacturers are on staggered schedules of 30 days or more, the lag in payment can cause a severe strain on cash flow and capital reserves. In order to correct or avoid these issues, manufacturers use accounts receivable financing. Accounts receivable financing, or factoring, gives manufacturers the ability to submit invoices and have then converted to cash much faster than waiting a month or longer. This boosts cash flow and allows manufacturers to build up working capital to cover expenses and take on larger client orders.
It goes without saying that every manufacturing business needs equipment. Whether manufacturers should purchase or lease equipment is dependent on the size on the operation, the type of equipment needed, whether specialized equipment is needed for short-term orders, and other factors. Fortunately, there are special equipment financing programs to help manufacturers acquire the equipment they need, as well as a wide range of leasing programs for manufacturing equipment.
Asset-Based Lines of Credit
Instead of traditional loans, manufacturers can leverage the assets they own to create a reusable source of working capital. Asset-based lines of credit can be structured around the value of things such as equipment, inventory, and receivables for a revolving business line of credit. Asset-based lines of credit are interest-only, and provide increased purchasing power for everything from office supplies to large orders or materials and much more.
Derix Capital Finance offers a wide range of funding solutions for manufacturers of all sizes. Whether you need working capital, equipment, an improved cash flow, or if you want to position your business for growth, talk to the experts at Derix Capital Finance today.