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The good news: Most manufacturing companies expect growth opportunities in the coming 12 months. According to the 2010 CFO Outlook, published by Bank of America, 69% of manufacturing company CFOs are considering financing in 2010, up significantly from last year. The top two reasons for small business financing are working capital and capital expenditures.

The bad news: Two years ago, getting six-figure traditional financing for a smaller manufacturing business was fairly straightforward. Today, it remains about as difficult as when the financial crisis first began to unfold. Banks are as reluctant as ever to finance small businesses, as they continue trying to limit their risk amid the economic turmoil. According to the FDIC, the volume of bank loans dropped in 2009 by $587.3 billion, or 7.5%, from 2008—the biggest full-year decline since World War II.

The result: Many small manufacturing companies are either struggling to stay afloat or finding it difficult to capitalize on upcoming commercial growth opportunities. According to the 2009 Year-End Economic Report published by the National Small Business Association, 39% of small businesses report they are unable to get adequate financing for their business. No doubt many of these are manufacturing companies.

So where should smaller manufacturing companies go to get the financing they need? The answer is to the most experienced and competitive private banks and alternative lending groups for small businesses.

Alternative Financing Options: Unlocking the value of your assets

If you’re a manufacturing company, there is simply no need to let your business be held hostage to the ongoing credit crisis. This is because there is already a well-developed market for alternative lending that can provide working capital for small businesses with assets. Loans can be secured against cash flow, accounts receivable, inventory, purchase orders, premises, machinery and equipment, and even the intellectual property associated with a brand or patent.

What many businesses don’t realize is the extent to which they can leverage their business assets to secure funding. Help for small business lending is not on the way: it’s already here. Alternative financing options can help many businesses get the backing they need when the banks say “No.” Best of all, this type of financing is now affordable. Loans from the most competitive private banks and small business lenders are priced at bank-like rates upwards, depending on the level of risk of the business being financed.

Securing traditional financing through banks and other financial organizations has now become highly challenging. As banks pull back more traditional commercial-and-industrial lending, they are no longer willing to lend even to small businesses with solid financials. Their security demands have also increased. This has pushed some companies to distress. It is preventing many others from taking advantage of commercial growth opportunities that lie ahead.

Unsurprisingly, businesses are increasingly turning to suitable private banks and other alternative lenders for small businesses. According to Bank of America Business Capital, 49% of manufacturing firms expect to use asset-based lines of credit in 2010, up from 42% last year. This type of alternative financing, once considered a last-resort option, is now regarded as a fundamental financing solution. Since alternative lenders in this space generally focus on collateral rather than credit-worthiness, they are able to do deals that more traditional lenders shy away from.

Getting the financing you need

When times are difficult, unlocking the inherent value of your assets, especially intangible assets, is attractive. Today, small business financing is affordable, offers flexible loan structures, and can provide the borrowing power that cash-flow lending alone may no longer be able to supply. At US Capital Partners, for instance, businesses can borrow money using their liquid, current assets or their fixed assets as collateral. Our small business loans are priced competitively with cash-flow loans, and come with fewer financial covenants. They can be used to secure working capital, but also to finance growth or acquisitions.

Getting the right financing can make all the difference for a small manufacturing business. Earlier this year, US Capital Partners arranged and co-loaned a $3.5 million senior secured credit facility for Consensus Orthopedics, a medical artificial joint implant manufacturer and distributor. The new credit facility included a revolving line of credit for both domestic and international assets along with a growth capital term loan to support the company’s continued domestic and international expansion.

It is important that your small business lender is able to provide you with service that matches your company’s specific needs to appropriately priced capital. It can also be helpful and cost-effective to work with a firm that not only arranges asset-based financing for small businesses, but is also able to offer funding—especially in situations where they can provide additional sources of capital from their own fund to “fill the gap” in your required capital.

If your manufacturing company is struggling to stay afloat or finding it difficult to capitalize on upcoming commercial growth opportunities, know that there is new and affordable financing available despite these tough times for small business lending.

If you would like to know more about how your business can secure the funding it needs, visit http://www.uscapitalpartners.net or call (415) 882-7160.

Video related to business lending

Chairwoman Velázquez debates the Small Business Lending Improvements Act of 2007 (HR 1332).

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About Author

Jeffrey Sweeney -
About the Author:

About the Author

Jeffrey Sweeney is an investment banker with years of experience in direct lending and corporate finance for smaller businesses. He is the CEO and Managing Director of US Capital Partners, Inc., an innovator in affordable small business lending. Since 1998, US Capital has been providing prompt and reliable financing solutions, including lending, corporate financing, and debt restructuring, to businesses across the United States and abroad. The company’s innovative approach allows it to provide the best financing available, not only for companies in excellent financial condition, but also for companies who may have been refused credit by traditional lenders.