The long gap between raw materials and payment
Manufacturing has one of the longest cash cycles of any industry. You buy raw materials, often with deposits to overseas or local suppliers. You hold them, run production, pay staff and power, store finished goods, deliver, invoice, and then wait for the customer to pay on 30, 60 or 90-day terms. For a large order, the business may be funding the job for months before a dollar comes back.
That's fine when orders are steady. It hurts when a big order lands, when a customer pays late, or when a key machine fails. A broken press, CNC or extrusion line can stop the factory, and the repair bill arrives at the same time as the lost output. Energy costs, wage increases and materials price rises add pressure, and an ATO debt can build quietly behind all of it.
Common manufacturing pressure points
- Large orders that need materials and labour paid for well before delivery
- Supplier deposits and minimum order quantities
- Long payment terms from major customers and retailers
- Machinery breakdowns and unplanned maintenance
- Buying new plant to win or fulfil a contract
- ATO and payroll-related debts
Manufacturing scenarios
| Manufacturer | Need | Exit |
|---|---|---|
| Food manufacturer | Won a supermarket range, needs packaging and ingredients up front | Payment of the first orders |
| Metal fabricator | Key machine failure, repair or replacement urgent | Insurance payout or business cash flow |
| Furniture maker | Major customer moved to 90-day terms | Receivables collected |
| Plastics or packaging | New machine needed for a contract, equipment finance still pending | Equipment finance refinance |
| Joinery or cabinet maker | ATO debt and a supplier account on stop | Refinance once arrears cleared |
| Engineering firm | Selling a surplus factory, settlement months away | Settlement of the property sale |
| Family manufacturer | Buying out a sibling's share of the business | Bank refinance |
Examples only. Every loan is assessed on its own scenario.
Why manufacturers wait too long for finance
Banks lending to manufacturers want detailed financials, debtor and creditor reports, stock reports and often a full review of the business. A bank refinance commonly takes up to three months or more, and you may not be approved for the amount you need. Debtor finance can help with invoices, but it needs set-up and doesn't cover materials before the invoice exists. Equipment financiers fund the machine, not the materials, labour or tax.
Cash flow lenders usually lend smaller amounts than a production run needs, and their frequent repayments take cash out of the business right when the materials are being bought. See our cash flow loan alternative page for a comparison.
How Equity Tap funds manufacturers
Many manufacturers own their factory, or the owners own homes and investment properties with equity. Equity Tap lends $50k to $5m for one to twelve months secured by a first mortgage, second mortgage or caveat over that property. A second mortgage lets you keep your existing factory or home loan in place, though the first lender's consent may be needed.
We don't need tax returns, BAS, profit and loss or bank statements, and we don't order a valuation before approval. You won't be pulled off the factory floor to meet a valuer. We need ID, the property and mortgage details, the purpose and evidence of the exit, such as purchase orders, a supply contract, an aged receivables list or a sale contract.
Interest for up to the first six months can be prepaid or added to the loan, so there are no scheduled payments during the production run. Interest is not waived, and the full cost is shown before you proceed. When the customer pays, the loan is repaid. For more on structuring the loan around your security, see commercial equity release.
How a production-run loan typically works
- You win the order or face the cost, and call us or your broker.
- We look at the factory, home or other property, the purpose and the exit.
- Conditional approval can often be given on the call, with a term sheet in about 30 minutes once we have the scenario.
- Eligible loans can settle in as little as 24 hours.
- You buy materials, run production and deliver.
- The customer pays, and the loan is repaid.
Typical exits for manufacturers
- Payment of invoices for the order the loan funded
- Equipment finance put in place after the machine is bought
- Refinance to a bank once the business is stable
- Insurance payout after a breakdown, fire or flood
- Sale of surplus plant, stock or property
Broker note
Manufacturing clients often come to brokers with a large order and a short deadline. If the bank or debtor financier can't meet the timing, send the scenario through our broker page. We give a fast indicative answer and you deal with the decision maker directly.
Also see wholesale and import and commercial property loans. Apply online or call 1300 123 024.
Business-purpose lending only. Approval, timing and terms depend on the scenario.
Frequently asked questions
Can I borrow to fund materials for a large order?
Can I use my factory as security?
We already have a first mortgage on the factory. Can you still lend?
Do you need stock and debtor reports?
Can you fund a machine while equipment finance is approved?
How quickly can a manufacturer get funded?
Is there a minimum loan size?
Brokers: send the scenario through the Equity Tap broker channel and you will deal with the same lending team.