Your Small Manufacturing Business Loan: Prepare Well, Keep the Faith

By Taylor Sisk, Staples® Contributing Writer

You’ve got a small manufacturing or maker/crafter business — or, perhaps, a firm foundation on which to launch one — and now it’s time to ask for a loan.

Your product is a good one; this business is your dream. So keep the faith and trust in yourself. You’re going to realize your potential. Here’s how to get the small business loan you need.

Research Your Options

“First, you're going to want to do your research and learn what loans are available to you,” says Erik Larson, a consultant with small business lending company Lendio.

The three most common funding options are line of credit, business credit card and Small Business Administration loan. Learn what you can about each type and consider the best lenders for the job. Larson points out that services are available, including Staples Business Loans, that will match people with the right lenders. “All you have to do is fill out a form.”

Plot Your Future

Potential lenders want to see a “bankable” business plan, whether you’re a traditional manufacturing operation or a maker/crafts business, according to Cheree Warrick of TheProfitPartner.com, a Fairfax, VA–based company that helps entrepreneurs write business plans.

She suggests your business plan address five critical areas:

1.    Market opportunity. Build a strong case for the likelihood of your success. Carefully research the size and demographics of your intended market.

2.    Your competition. Establish your place in the market. Describe what products are already being provided and what your business will bring that’s missing.

3.    Customer acquisition and retention. Describe how you plan to attract customers and ensure loyalty so it’s clear that you can grow and maintain a revenue stream.

4.    Team building. Form a solid team at all levels of your business or you’ll never attain your funding and business goals. Lenders want a strong team that can take the venture all the way.

5.    Financial forecasts. Demonstrate to the bank that the loan payments comfortably fit into your budget without breaking it.

Let’s assume you have a small manufacturing business that’s up and running — and returning a modest profit. Now you want to secure a loan to expand your operations. Be prepared, Larson says, to specifically respond to what you’ll be using the loan for, how it’s going to increase revenues and what the state of your cash flow is.

He suggests highlighting job creation in your plan and your funding application, especially if you're going for an SBA loan. “Show them exactly how your loan is going to help either create jobs or maintain your current workforce,” he advises.

Remain Confident

Small business owners should trust that “there is definitely capital out there for them, even if their credit is less than perfect,” says Stephen Sheinbaum, founder of Merchant Cash and Capital, an alternative lender based in New York that Staples Business Loans works with through its services provider, Lendio. “You shouldn’t feel as if you can’t have a conversation with a lender just because your credit score isn’t 850.”

What’s more, the fact that you’re in the manufacturing/maker business might give you a leg up on many others seeking small business loans. Certain aspects of your business make you more qualified for a higher-quality loan because:

  • You’re likely to have some solid collateral in your business that can secure the loan, such as the equipment required to produce your commodity.
  • You may have extended contracts with your clients, which can make your lender feel more comfortable with the prospects of repayment.

Play up your assets, both material and intellectual, when seeking a manufacturing loan. Your confidence will pay dividends.

Stay in the Know

Stay apprised of developments in your area of manufacturing or craft and the broader economy, so you have a better sense of when it’s a good time to seek financing for taking the next step.

Beyond knowing your immediate competition, “know your industry,” advises Aga Merx, vice president and SBA manager for Proficio Bank, which specializes in small business financing in the Salt Lake City area. “Show the lender that you research what you’re up against, you monitor what's out there and you’re always on top of your game with your business.”

Adds Larson: Be involved with your industry. Subscribe to trade publications, go to conventions and network with people doing similar things.

“When you see opportunities,” he continues, “start the business loan process right away so you have the capital when you need it.”

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