Purchasing Materials for Your Manufacturing Company
Manufacturers often face a dilemma when it comes to purchasing raw materials. Day-to-day operations and customer requests frequently place a strain on internal finances. The cost of raw materials, equipment, and labor are not inexpensive, and manufacturers cannot always rely on a positive cash flow to exceed the cost of production. Taking on debt from loans is not a viable solution for manufacturers, but there is a simple way to create a reliable source of working capital.
Sales and Revenue Are not the Same
Manufacturers make a lot of sales and commit to contracts with long-term clients. Receivables may be high, but that doesn’t mean those clients are paying those invoices immediately. This creates a strain on cash flow, and production cannot slow down. In many cases, manufacturers use short-term loans to smooth out finances, but loans can exacerbate an existing and recurring problem. The debt from those loans must be repaid, and if the problem occurs again, manufacturers take a bigger hit to their business credit ratings, and an even larger segment of their capital goes toward paying off liabilities, instead of producing goods for customers.
A Better Source of Capital
Manufacturers have the ability to create a renewable source of working capital without taking on debt from loans. Asset based financing is a revolving line of credit structured around the value of equipment, inventory, vehicles, owned property, and receivables. This source of capital can be used for everything from purchasing materials to smoothing out revenue cycles while waiting for payment from customers. The best part is there is no debt from using asset based financing. Manufacturers can take on large orders, position themselves for growth, and break free of the debt cycle associated with traditional loans. Additionally, as your manufacturing business grows, the amount of financing available through the revolving line of credit will also increase.
CNH Finance is a national leader in asset based solutions for manufacturers. We work directly with business owners to unlock the highest value possible for their assets, so they have the capital necessary to thrive and grow. Contact our offices today to learn more about how asset based financing can boost your manufacturing business.