Choosing the best manufacturing finance company can be a daunting task. There are many complex factors that come into play and knowing the ins-and-outs isn’t easy. Discussed below are several of the major issues that need to be understood in order to select the right finance company for your specific business needs. Sometimes the best solution to your manufacturing finance needs is not always the easiest or most straightforward solution.
Let’s take look at critical variables when choosing a manufacturing finance company:
Your Specific Industry
A financing company that understands all the nuances within your manufacturing sector has many critical benefits to you. Heavy industry manufacturing processes in metal, oil and chemicals vary greatly compared to clothing and textiles or food production. Each of these manufacturing processes are also unique in the way they are bought, sold and financed. It’s crucial that the finance company has deep expertise in your manufacturing process and best industry practices to help optimize efficiency, accuracy and profitability. The best financing company will help increase lead time, time to market and minimize supply chain disruptions. With over 21 years of experience, Paragon Financial has deep industry expertise dozens of industries and manufacturing processes.
Minimum Revenue and Deal Structure
The exact amount of working capital you need and when you need it is critical in saving your manufacturer cash. For example, do you need to advance a full 1 million dollars immediately or can you do the initial design and engineering with $500,000 and take the balance at a later date. Analyzing the structure of how your lending package is scheduled can save you interest points and working capital.
Each financing company has different levels of risk they are willing to take on. Make sure you understand these limits when researching finance companies. Lending companies typically have minimums based on your manufacturer’s yearly revenue. They will also have maximums based on the type of clients they are willing to fund. Our typical client has sales between $30,000 and $3,000,000 per month.
Your Personal and Company’s Credit
Having poor personal or business credit can often be a non-starter when discussing a loan with your bank. Only 27% of businesses obtain financing through bank loans. What are the options? Factoring companies focus much of their approval process on the credit of the manufacturers buyers, not your own. This allows you to leverage profitable opportunities and get the funding you need in order to buy raw material, pay for labor, new training or buy new equipment. Ask your funding source about a factoring line of credit compared to traditional bank financing.
Your Time in Business
Being a startup implies increased risk to a lender. Why would a bank take the enormous risk in loaning to a start-up working capital? Most banks and traditional lenders want 2-3 years of tax returns and solid personal credit of the owners. You can get cash from friends and max out your credit cards, but what happens if things do not go as planned? No business is worth losing friends and family over or risking your home to bankruptcy. When factoring an invoice or purchase order, the time in business becomes a non-factor. At Paragon Financial, we look at the credit worthiness of your buyer to determine risk, not how long you have been in business.
One Time or Long Term Funding Solution?
With anything important in life, creating trustworthy, long-term relationships is critical to your happiness and success. The same goes for finance companies with trust built over time and history. At Paragon Financial, where we are interested in long-term relationships of one year or more. We are fully dedicated to our manufacturing clients from day one or year 10. Some companies will do short-term deals such as spot factoring where you’ll receive an advance on a single invoice without building a trustworthy relationship with the financing company.
The Experience of the Funding Source
It is said, ‘you get what you pay for’, but this doesn’t necessarily apply to finance companies. An inexperienced finance company will often take on unnecessary risk in order to obtain your business. They don’t have the depth of knowledge in your industry needed in order to optimize efficiency, accuracy and profitability with your financing package. At Paragon Financial, we have been in business for over 21 years, funding over 2 billion dollars to companies just like yours. We know what it takes to build trustworthy relationships with our clients.