Manufacturing companies depend upon reliable supply chains and distribution companies to ensure that materials are available for production activities and to get their products to market in a timely way. Delays in payment can significantly impact the ability of manufacturing firms to pay vendors, manage ongoing expenses and to arrange transportation for products en route to retail outlets. Necessary equipment upgrades, new product lines and other costs associated with expansion can drain available cash reserves and leave manufacturing companies in an uncomfortable financial position. Worse yet, bank loans may be out of reach for companies that have had credit difficulties in the past or that are already in debt due to previous expansions. Asset-based lending arrangements can be of real benefit to these companies in managing cash flow problems, maintaining a steady flow of materials to the factory floor and moving products to retail shelves.
Traditional lenders generally accept only certain types of collateral to secure their loans and lines of credit. Real estate, large-scale equipment, vehicles and financial instruments are usually considered acceptable by banks and lending institutions; other types of collateral, however, may be overlooked by these lenders in evaluating loan applications from manufacturing companies. Asset-based lenders employ a more flexible approach to collateralization of loans. Unsold inventory, raw materials and unpaid invoices can often be used by these lenders to approve loans that traditional lenders are not equipped to evaluate fairly. By using these untapped resources to acquire necessary working capital, companies can often manage cash flow problems more effectively to preserve their position in the competitive manufacturing industry.
Accounts receivable financing, asset-based loans and purchase order funding arrangements can be disbursed as one-time loans or as lines of credit. In most cases, manufacturing firms can benefit most from revolving lines of credit. These lending arrangements can be expended to manage cash flow difficulties or to fund expansions; once the amount owed has been repaid, the line of credit is available to be used for future operational needs. Developing an established relationship with an asset-based lender can provide flexibility for cash flow management in the manufacturing field.
Asset-based lending companies like Commerce Commercial Credit can be valuable partners for manufacturers in managing their financial affairs proactively and efficiently. By using inventory on hand to collateralize these alternative lending arrangements, manufacturing firms can expand their operations and deal with cash flow problems to stay competitive in their industries.