Financing options for growing manufacturers

A recent report published by the National Association of Manufacturers (NAM) provides an optimistic view of the industry. According to the report, "The manufacturing industry is increasing its output and bringing revolutionary technologies." The year 2016 saw "new developments related to autonomous vehicles, promising new medical treatments, and the smartest technology to date."

The report notes, "For every dollar invested in manufacturing, another $1.81 is added to the economy. For instance, if a company spends $1 billion toward a new facility in a community, one can expect economic activity to increase by nearly $2 billion more."

Here in Colorado, the flourishing economy has positioned the industry for impressive growth. According to the Manufacturers Alliance for Productivity and Innovation (MAPI), "Expectations for 2017 include modest growth overall, with some sectors (such as construction supplies, high tech, and healthcare manufacturing) and some regions (including Colorado) faring better than others." Sectors such as bioscience, technology, beverage and natural foods are leading the way in innovation across the West and helping to grow the 18 million American jobs that manufacturers support.

As the industry and specific sectors continue to emerge, we are seeing an increased need for financing in three specific areas: advanced technologies, automation, and space.

• Advanced technologies: We are seeing a great trend toward 3D printing, software and other technologies that simulate the design and assembly line process before products are created.
• Automation: Close to 15 million new jobs will be created in the U.S. over the next decade as a direct result of automation and artificial intelligence, equivalent to 10 percent of the workforce, according to estimates from Forrester Research.
• Space: As companies continue to expand and add jobs and equipment, the need for additional real estate or space becomes an important consideration. This includes the need to lease or buy specialized manufacturing facilities from offices to warehousing and distribution spaces to flex or heavy industrial building types.

Financing options

Generally speaking, business owners have several options when it comes to financing these types of capital expenditures, including operating capital, bank financing or an operating lease or capital lease. There are a variety of options for credit facilities that work for various situations and stages of growth.

Those who do not want to dip into operating capital or add to the balance sheet should be prepared to ask the following questions to any financing partner:

• What kind of financing options can you provide?
• Do you finance the types of equipment or real estate our business needs?
• What is your application process like?
• Do I have the ability to customize a payment schedule?
• Are there any up-front fees?

As the manufacturing economy trends upward, the cycle for equipment replacement, new equipment, and space is underway. Financing these types of business expenses can free up cash reserves to grow other areas of the business, save for unforeseen circumstances and, most importantly, preserve working capital.

Rob Haynes has 27 years of commercial leasing, corporate finance and banking experience, and is currently director of business development for Dynamic Funding, Inc. (DFI). Reach him at 303/754-2046 or haynes@dynamicfundinginc.com.

Don't miss CompanyWeek's 2017 Manufacturing Growth & Investor Conference, September 20 in Denver, Colorado.