Strategic Financing for Small Manufacturers:
A Roadmap to Success

If one thing is true of the manufacturing industry, it’s that it’s hard to succeed in. A company’s success or failure is rather harshly determined by a variety of hard metrics, black-and-white factors, and benchmarks. The pressure to satisfy those benchmarks amplifies as a small- or medium- sized company operating in an industry full of titans. You need a strategic financing plan that will bring you the resources and flexibility necessary to reach your production targets and forge a path to expansion.

So, where do you get started? You can start by turning to the best resource for small businesses that you will find anywhere in the country – the US Small Business Administration (SBA).

What the SBA Does

The SBA helps small businesses and entrepreneurs succeed by providing them with an abundance of educational materials and financial assistance. They can connect you with financial institutions to open up a whole world of competitive financing options to you, and much more. Overall, they position themselves as the crutch that you can lean on to build out your strategic financial plan as a smaller manufacturer.

Some examples of what the SBA helps smaller manufacturers with include:

• Providing loans and capital for…
  • Purchasing new equipment and machinery
  • Upgrading existing equipment and machinery
  • Expanding and renovating facilities
  • Acquiring inventory
  • Organizing exports to international markets
  • Providing contract opportunities
• Supporting internal upgrades to back up financing
  • Process improvements
  • Workforce management
  • Supply chain diversification
  • Sales strategies
  • Cybersecurity
  • R&D efforts

SBA Loans and Programs for Manufacturers

Some of the most useful financing options the SBA provides to manufacturers include 504 loans, 7(a) loans, and more. 504 loans provide long-term, fixed-rate financing for manufacturers to acquire fixed assets for a maximum loan total of up to $5.5 million. 504 loans can be used to purchase, build, or upgrade facilities, land, and long-term machinery. They are available to any businesses operating as a for-profit company in US territory with a net worth of under $15 million and a net income of under $5 million after federal taxes for two years before your date of application.

7(a) loans are more general-purpose loans that can be used for much of the same things that a 504 loan can, but with fewer restrictions, including refinancing current debt or facilitating a change of ownership. Similar to the 504 loan, the maximum loan total for a 7(a) loan is $5 million. In order to qualify for a 7(a) loan, you need to have an operating, for-profit business in US territory that meets SBA size requirements. Furthermore, you need to demonstrate creditworthiness, despite not being able to acquire the credit you need from non-government sources.

Other programs the SBA can utilize to help your small manufacturing business include:

• Microloans: Loans for small businesses under $50,000, with the average loan amounting to $13,000
• Disaster assistance loans: Low-interest loans designed to help small business recover when declared disasters (like inclement weather) strike
• Small Business Investment Companies (SBIC): Privately owned companies, licensed and regulated by the SBA, that invest in small businesses through debt and equity
• Small business Innovation Research (SBIR): Assistance to meet R&D needs and commercialize federal research

As a small manufacturer, acquiring the financing you need to survive and thrive in a competitive industry filled with titans can be difficult. However, you have a resource that you can always rely on to help – the Small Business Administration. Use the various programs and options they offer to form the basis of your strategic financial plan and hit the ground running. Want to learn more about the SBA and what it can do for you? Check out this guide or visit their official website.