Cents For Sense Blog | External Financing for a Factory Building Project: Understand Your Best Options | Talkmarkets

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External Financing for a Factory Building Project: Understand Your Best Options

Date: Monday, April 6, 2020 11:40 AM EDT

Financing is a worry for every business, especially when there are capital-intensive projects on the horizon. Whether it's about building afresh or making large-scale changes to the current facilities, factory building is a costly project to undertake.   

While most casual observers may believe that companies should be able to self-finance huge factory projects, most business owners and executives know that the reality is very different. The distribution model of many manufacturing companies means that while they may be worth a whole lot, they don't often have excess working capital. Even if a company did have extra working capital, such that it can afford to build a factory, it would likely overstretch its finances for a while. Overstretching your business' finances can have dire consequences in the event of unexpected circumstances, which can be anything from aggressive competitors to natural phenomena.

In this piece, we will be exploring the best financing options for both new and already-existing businesses. We'll also try to highlight the best options for each situation. 

Manufacturing Loans

Traditional banks are one of the best options for obtaining loans for setting up a manufacturing plant. They typically offer competitive rates and terms for businesses. They also offer multiple financing products like line of credit, equipment financing, and real estate loans, all of which can come in handy for business.

They, however, have the disadvantage of being difficult to obtain. Banks are typically looking to give out loans to businesses that offer the least risk. There's also a high amount of documentation that's required to obtain loans from traditional banks. The back and forth needed to get these loans can make them less appealing for a business looking to move fast.

Small Business Administration Loans

These loans are an excellent option for organizations that have issues securing loans from traditional banks. They typically require similar terms like conventional loans, with the exception that they are backed by the government.

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