The current economic climate is favoring manufacturers, and taking advantage of growth opportunities can help business owners carve out a larger market share for their companies. However, using traditional loans can keep manufacturers from growing to their full potential.
Debt Has a Ripple Effect
Growth is about reaching new milestones, tapping into new markets, and rolling out new products. Traditionally, growth projects involve taking out loans, which impact credit scores and place debt on the balance sheets. The balance on the loan is repaid from a portion of the post-growth revenue. Yet growth combined with debt is a big risk. Even if sales are low during that period immediately following expansion, loan payments must be made or else the business is in danger of defaulting. At the same time, manufacturers still have to maintain overhead expenses, payroll, maintenance on equipment, and more. Frequently, manufacturers end up scaling back their plans for growth to figure how much of a strain the debt form a loan will place on cash flow.
Rethinking Growth for Manufacturers
Manufacturers can quickly accumulate the capital necessary for growth without having to rely on debt-based financing. Instead of waiting on staggered payments from customers, manufacturers are leveraging receivables to boost cash flow and build up cash reserves. Manufacturers are used to issuing invoices with payment schedules of up to 90 days. The payment schedule is a standard business practice, but it also leaves manufacturers waiting on revenue. By leveraging receivables through factoring services, businesses can submit unpaid customer invoices and receive access to funds on the same day. Factoring reduces the need to take on debt for growth because the fast turnaround allows manufacturers to build up capital for everything from acquiring new equipment to moving into larger facilities, research and development on new products, and even hiring more staff or marketing campaigns. Being able to grow your business without the burden of debt allows you to focus on operations and clients instead of trying to maintain a strong cash flow to balance overhead expenses with loan installments.
At New Century Financial, we specialize in working capital solutions so manufacturers can improve cash flow and reach their growth milestones without limiting their potential with debt-based loans. Contact our offices today and get a competitive edge on growing your business.