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Financing Small Manufacturing Businesses
When seeking financing for your manufacturing business, it is important to look at many options at the same time. Financing can come from unexpected sources. In addition to traditional sources such as private equity and commercial lenders, there are numerous public options that can help get needed capital. This guide explains public and non-traditional financing for small manufacturers.
Before Your Begin
A strong business plan is a crucial part of the financing application process. Your business plan needs to clearly articulate your business and financial goals, and your path to achieving them. If finding difficulty obtaining financing, you may need to revisit your business plan.
The following resources will help you develop a business plan:
Your local Manufacturing Extension Partnership (MEP) Center offers free and low-cost seminars and hands-on help with business plans and other issues facing new start-ups and expanding businesses.
Types of Financing Programs
Many entrepreneurs typically start pursuing financing through traditional commercial lenders and equity firms and quickly get their hopes dashed. Venture capitalists looking for the next big thing may only be interested in multi-million dollar deals, while commercial lenders are more risk adverse than every before.
However, several Federal, state and local programs exist to help small manufacturers obtain financing for working capital, equipment and other needs. These programs include the following:
Loans
Loan guarantee programs provided by state and local economic development agencies, the U.S. Small Business Administration, the U.S. Department of Agriculture, and other agencies support manufacturing industries by providing funds need to obtain machinery, equipment and working capital. Loans are commonly used for start up and small expansion projects.
Visit the Small Business Loans Guide for more information on these programs.
Tax-Exempt Bonds
Tax-exempt industrial revenue bonds are an attractive financing option for small manufacturers looking to expand operations and upgrade facilities. Tax-exempt bonds are typically used for expansion projects that require new machinery and equipment, and that will ultimately result in job creation and improved economic conditions in the business’ community.
Visit the Tax-Exempt Bonds page for more information about this financing option.
Import-Export Assistance
The Trade Adjustment Assistance for Firms is a federal program providing financial assistance to manufacturers affected by import competition. Sponsored by the U.S. Department of Commerce, this cost sharing federal assistance program pays for half the cost of consultants or industry-specific experts for project that improve a manufacturer's competitiveness.
The Federal government also offers a number of export financing programs to help small manufacturing firms expand their business overseas.
Grants
Federal and state governments do not provide grants to start and expand manufacturing operations. However, there are a few programs in which for-profit, small business can compete for research grant funds.
Visit the Research Grants for Small Businesses page for more information.
Venture Capital
If you manufacturing high technology, venture capital is viable financing option. But finding the right source can be difficult for early-stage businesses. While government agencies are not equity investors, they do have programs that match up small manufacturers with private equity investors.
Visit the Seed and Venture Capital Guide to learn more about these programs.
Locating Financing Programs
The Loans and Grants Search Tool lets small businesses quickly locate financing programs for which they might quality. Click on a state link below to learn about Federal and state government-sponsored financing programs available to small manufacturers.
