Manufacturing Funding: How to Finance Your Manufacturing Business

How to Finance Your Manufacturing Business

Manufacturing is on the rise in the U.S., and if you own and operate a manufacturing business, then you know that having the right business financing is key to your success. From large upfront investments to the ongoing capital needed to keep production running, manufacturers can often face significant financial hurdles. That’s where the right manufacturing funding can make all the difference.

In this overview, you’ll learn the funding options available for your manufacturing business, and how to navigate them.

Why do you need working capital for your manufacturing business

Winning large orders is exciting! But to complete them successfully and get paid, you’ll need plenty of working capital.  Having that working capital cushion gives you the wiggle room to overcome:

• • Unexpected production costs: Issues during production, unexpected cases where outsourcing is needed, and changes to supply chain costs can all cause production costs to exceed your original expectations.

• • Delayed customer installments: Large-scale production is often paid for in chunks. A customer typically pays a deposit to get started and then one or more installments during and after production. While this helps spread out costs, customers don’t always pay on time, and late payments can stall production and increase financial pressures.

• • Cash flow challenges: As you grow, you’ll often face cash shortages. With rising sales and expenses, slow customer payments mean you’re covering today’s higher costs with months-old lower sales. To get ahead of this, you can create cash flow budgets to anticipate how much cash will be tied up while you await payments.

Take the time to determine how much working capital your business needs. Are you finding that you’ll need more to meet your goals? Then it may be time to explore financing options like SBA loans, lines of credit, and more.

Where can I find manufacturing funding?

When you’re ready to apply for financing, you’ll find a whole world of lending options available for your manufacturing business. Each lender plays a role in the financial landscape and knowing which type of lender best fits your needs is the first step in your financing journey. Here’s an overview of what you’ll find:

How to find the right manufacturing loan

Not all loans are the same, and finding the right type of funding to fit your needs ensures that your business will be around for the long term:

• • Short-term funding: These loans help you cover short-term needs, like buying inventory or supporting your cash conversion cycle. Some financing options include credit cards and lines of credit.

• • Long-term funding: These loans support your bigger, long-term needs, like purchasing or renovating your business location, upgrading equipment, and even working capital to fuel long-term growth needs. Some financing options include term loans, mortgage, or investor money.

What SBA loans are available for manufacturing businesses?

You can use a combination of SBA loans in conjunction with each other for your business’s needs, including SBA 504 loans, SBA 7(a) loans, SBA lines of credit, SBA Microloans, and the MARC Loan.

SBA 504 loans

SBA 504 loans are for significant business investments, such as owner-occupied property or large machinery. With an SBA 504 loan for your manufacturing business, you can finance a plant to fit all your needs, including:

• • A layout that supports flow

• • Heavier floor loads for equipment

• • Three-phase power and upgraded service

• • Proper ventilation and make-up air

• • Cranes and reinforced bays

• • Higher-capacity sprinklers

• • Loading docks

• • Code and environmental improvements tied to production

Because these assets have long useful lives, matching them with long-term, fixed-rate financing keeps your working capital free for materials and payroll.

When your business reaches a certain stage, investing in property and large equipment becomes essential. As your manufacturing business grows, owning your property and equipment can increase your margins and cut costs.

The SBA 504 loan has several benefits, including a down payment as little as 10%, longer repayment term, and lower interest rate. Here are the different ways you can use an SBA 504 loan:

• • Buying owner-occupied commercial real estate

• • Building an owner-occupied building form the ground up, and making improvements to current facilities

• • Refinancing debt

• • Purchasing equipment and fixed assets

SBA 7(a) loans

The SBA 7(a) loan is one of the most versatile loans that can be used for working capital, inventory, fixed assets, refinancing, and construction costs. They’re best for projects with more than one financing need, such as funding to build a factory, set up its equipment, and stock it with inventory all at once.

And for manufacturers, there’s an added advantage: a fee waiver available for 7(a) loans approved between October 1, 2025, and September 30, 2026. This can mean significant savings for you and your business. The SBA 7(a) loan can cover:

• • Tooling and fixtures

• • Initial raw-material buys

• • Vendor deposits

• • QC equipment and certifications

• • Training and commissioning costs

• • Early payroll needed to stand up a line before receivables start turning

Since the loan uses are mixed and the timing is uneven, a lender might bundle all these costs into a single SBA 7(a) term loan so that production can ramp up without straining cash. Alternatively, they may use an SBA 504 loan together with an SBA 7(a) loan to cover these costs to get you the best deal possible for your business.

SBA 7(a) loans range from $50,000 to $5 million, and most lenders generally require you to contribute at least 10-20% of the total project cost from your own or investors’ equity. These are term loans, disbursed at the beginning of the project and then paid back evenly over a repayment period while accruing interest.

Lines of Credit

Lines of credit are designed for short-term needs, such as funding receivables and inventory, and supporting overall working capital. Unlike a term loan, where you receive and start paying interest on a loan immediately, a line of credit is a tool you can borrow against and pay down multiple times,  giving you access to cash to maintain your operations. Lines of credit include:

• • Limit: Every line of credit is structured with a limit or a “line amount”. This is the maximum amount you can borrow from the line of credit.

• • Interest rate: You only pay interest on the funds that you’ve used each month. At the end of your term, you’ll pay the remaining balance in full.

• • Repayment period: Lines of credit offer great flexibility. However, they’re not designed to last forever. As a result, when you get a line of credit, your lender will tell you how many months you’re free to borrow money from the LOC and pay it back. After that period, you’ll need to repay what’s still owed on the line.

SBA Microloans

Microloans are smaller loans that can often significantly support small manufacturers. These loans range from $5,000 to $50,000 with affordable interest rates and reasonable repayment terms. Microloans are strictly available through Community Development Financial Institutions (CDFIs) and non-profit lenders, so you won’t be able to find them through your local bank.

One of the greatest benefits of Microloans is their connection to free one-on-one advisory services. The CDFIs and non-profits, like Pursuit, offering these loans get grants from the government to help you with financial strategies, accounting, marketing, sales, and more.

MARC Loan

The MARC loan is the newest product from the SBA, launched in October. It’s nearly identical to the SBA 7(a) loan, but there’s one key difference in how it treats inventory and receivables as collateral. This addresses a significant challenge for many small manufacturers: being flush in inventory and receivables but limited in fixed assets and cash.

Most lenders use real estate or large-scale equipment as collateral for loans because they retain more value and are easier to resell if things don’t go as planned. Because small manufacturers usually don’t have these assets, they struggle to qualify for financing. As a result, many manufacturers turn to other expensive and less-transparent lenders. This is why the new MARC loan is a great option – it’s the SBA’s new program exclusively for manufacturers.

A significant benefit of MARC is its flexibility, and it has three main aspects:

• • Revolving credit line option: This helps manufacturers manage seasonal cash flow swings, ramp up for large orders, or cover costs while waiting on receivables.

• • Term loan option: This provides predictability when fixed repayment works better.

• • Collateral flexibility: The MARC loan gives lenders more options for equity, like inventory and receivable, as well as facilities or equipment as collateral. While this is beneficial for small manufacturers, note that it’s ultimately up to the lender on what collateral will sufficiently cover equity requirements.

How Pursuit can support your manufacturing business

Manufacturing grows when financing matches reality: long-life assets with long terms, flexible working capital, and partners who understand orders, inventory, and time.

At Pursuit, we serve businesses in New York, New Jersey, Pennsylvania, Connecticut, Nevada, Illinois, and Washington and offer manufacturers SBA 504, SBA 7(a), lines of credit, SBA Microloans, and more so capacity expands, cash flow strengthens, and you can accept bigger orders with confidence.

Contact us today to learn more.