Is a manufacturer bankable?

Your machines are the best collateral we see

A CNC machining center, press brake or injection moulding line has a published auction market, a serial number, and a resale value a lender can verify independently. That puts manufacturing near the top of the collateral hierarchy — well above receivables and vastly above goodwill.

It also means the equipment can carry a deal that the P&L alone would not. A shop with compressed margins but a strong machine base has options a service business in the same position simply does not have.

• Orderly liquidation value (OLV) is the number that matters, not what you paid. Lenders typically advance against OLV, often around 70%.
• Age matters less than you would expect. A well-maintained twenty-year-old Haas holds value. Specialized or single-purpose machines hold much less.
• Tooling and fixtures generally do not finance separately — they are assumed into the machine.
• Appraisal is usually required above a threshold. Budget the time; it is a common cause of delay.

Concentration is the number that decides the file

This is where manufacturing files most often fail, and it has nothing to do with how well the shop runs.

If you are concentrated, address it directly rather than hoping it goes unnoticed. Length of relationship, contract terms, tooling you hold, qualification barriers a competitor would face — these all mitigate concentration, and none of them appear on a financial statement unless you say so.

Inventory only counts if it is accounted for properly

Manufacturers hold raw materials, work in progress and finished goods, and a lender extending a borrowing base treats all three differently:

• Raw materials advance reasonably well when they are commodity inputs with a resale market.
• Work in progress is usually excluded entirely. Half-finished parts have almost no value to anybody but you.
• Finished goods advance well if they are sellable to more than one buyer, and poorly if they are custom to a single customer.

Contract financing for the order you cannot fund

The most common growth trap in manufacturing is winning an order larger than your working capital can support. Materials and labor go out months before the invoice is paid, and the bigger the win, the worse the squeeze.

Contract and purchase order financing exists for exactly this — funded against the award and the credit of whoever issued it, rather than against your balance sheet. For a shop with a signed order from a creditworthy buyer, it is usually the right answer and it is far cheaper than the alternatives people reach for.

Where manufacturing files get declined

• Customer concentration above 40–50% with no mitigating structure.
• No perpetual inventory. Kills the borrowing base and casts doubt on reported margins.
• Job costing that cannot be reconciled to the general ledger.
• Deferred maintenance on the machine base. Appraisers see it, and it comes straight off the advance.
• Owner compensation buried in cost of goods, making true gross margin impossible to read.

The path to cheap money

Manufacturing has a clear route: accrual financials with perpetual inventory, job costing that ties to the GL, and a customer base where no single account dominates. That profile supports a revolving line on a borrowing base — the cheapest working capital available to you — and an SBA 504 if you want to own your building rather than rent it.