Many businesses use lines of credit, including retail stores and construction companies. For these companies, a line of credit acts to cover short-term needs with cash flow, such as for payroll. Can a manufacturing business qualify for a line of credit in the same way, even though the focus is primarily on production and exportation rather than sales and distribution?

Business Lines of Credit for Front-Loaded Production

Many lenders understand that certain businesses have front-loaded operations. In other words, these companies require significant capital at the start of a project in order to generate profits later. Software companies and construction businesses actually fall into this same category. They need funds to purchase materials, hire workers and move forward with operations during weeks or months before they can bill clients.

This means that manufacturing companies shouldn’t have any problems applying for a business line of credit as well. As long as your business has been operating for sufficient time to show stability, and your relationship with suppliers shows good money-management skills, you should be able to qualify relatively easily.

Secured Versus Unsecured

One advantage that manufacturers have for getting significant business credit are the pieces of heavy machinery used in manufacturing. You may be able to leverage this equipment as collateral to cover a line of credit completely, which is known as a secured line of credit. Of course, many lenders also offer unsecured lines of credit, meaning that you don’t need any collateral to qualify.

Which option is better for your business? On one hand, secured credit may carry perks such as a larger spending cap and overall lower interest rates. However, unsecured business credit means you don’t have to risk valuable business assets. If you rely on all of your machinery every day to serve your customers, you may want to choose unsecured credit just to be sure.

Ways To Use Lines of Credit for Manufacturing

There are countless ways to make business credit work in your favor for manufacturing. To make the most of this valuable source of capital, look for ways to save money and boost profits. For example, perhaps you can afford to buy raw materials in greater quantities to qualify for a larger discount. You may be able to ramp up production during times of year where purchasing demand is highest, such as around the holidays.

This type of working capital is an amazing tool. Applying is never a bad idea. Use the credit to help your manufacturing business grow.