At Cockatoo we get asked a lot about growing businesses.
We do our best to arm our customers with the best marketing and business advice we can so that the scucced.
If you are a manufacturing business in Australia then this article will cover the common finance needs to rapidly scale your manufacturing business.
But first a primer on manufacturing.
What Is Manufacturing?
Manufacturing is the process of turning raw materials into finished goods.
This is often a local operation that takes either raw materials or component parts and creates new products that can be on sold.
This manufacturing process is labour, material and machine heavy and often comes at a significant cost when doen localy.
This process typically involves several steps, such as:
- Raw materials are sourced from suppliers or extracted from the environment.
- The raw materials are processed and transformed into intermediate goods, such as component parts or sub-assemblies.
- The intermediate goods are assembled into finished goods, such as cars, appliances, or other products.
- The finished goods are packaged and shipped to customers or distributors.
While manufacturing is a key part of the Australian economy we know times are tough out there.
Sky rocketing materials costs is driving businesses to think outside the box both with their production but also their finances.
Across Australia there is a wide range of manufacturing companies that range from small, local operations to large, global corporations.
Manufacturing is a complex and dynamic process that involves many different steps and stakeholders, and it is essential to the production and distribution of goods and products around the world.
What Is Australia’s Largest Manufacturing Industry?
According to data from the Australian Bureau of Statistics, the largest manufacturing industry in Australia is the food, beverage, and tobacco industry.
This industry accounted for 16.9% of total manufacturing sales in Australia in 2020, making it the largest contributor to the country’s manufacturing sector.
Other major manufacturing industries in Australia include:
- Chemical, plastic, and rubber products (11.3% of total manufacturing sales)
- Fabricated metal products (8.5% of total manufacturing sales)
- Machinery and equipment (7.4% of total manufacturing sales)
- Transport equipment (6.7% of total manufacturing sales)
- Printing, publishing, and recorded media (6.4% of total manufacturing sales)
Overall, the manufacturing industry plays a significant role in the Australian economy, and the food, beverage, and tobacco industry is the largest contributor to this sector.
What Is A Manufacturing Loan?
A manufacturing business loan is a type of financing that is specifically designed for companies in the manufacturing industry.
This type of loan can be used to fund a variety of expenses related to running a manufacturing business, such as purchasing raw materials, hiring staff, buying equipment, or expanding the business.
Manufacturing loans (business loans) are typically offered by banks and other financial institutions, and they may have special terms and conditions that are tailored to the needs of the manufacturing industry.
For example, a manufacturing loan may have a longer repayment period than other types of business loans, to allow for the longer production cycles and higher upfront costs associated with the manufacturing industry.
To apply for a manufacturing business loan, a company will typically need to provide the lender with detailed financial information and a business plan, as well as proof of collateral and personal financial information.
The lender will then assess the company’s creditworthiness and the viability of the loan before deciding whether to approve the loan.
Overall, a manufacturing business loan can be a valuable source of funding for companies in the manufacturing industry, helping them to grow and expand their businesses.
What Types Of Business Loans Can A Manufacture Get?
There are many different types of business loans that a manufacturing company can apply for, depending on its specific needs and goals.
Some common types of business loans for manufacturing companies include:
- Term loans: Term loans are a type of financing that provides a lump sum of money that is repaid over a fixed period of time, with a fixed interest rate. This type of loan is often used for larger expenses such as purchasing equipment or expanding the manufacturing plant.
- Lines of credit: A line of credit is a type of financing that allows the borrower to access a predetermined amount of money as needed, up to a certain limit.
The borrower only pays interest on the amount of money they borrow, and they can repay the borrowed funds and borrow again, as needed.
This type of financing is often used for smaller, short-term expenses such as purchasing inventory or covering operating costs.
- Equipment loans: Equipment loans are a type of financing that is specifically designed to help businesses purchase new or used equipment.
The equipment itself serves as collateral for the loan, and the loan is typically repaid over a fixed period of time.
What Are The Risks Of a Manufacture Getting A Business Loan?
Like any other type of financing, business loans for manufacturing companies come with certain risks and potential drawbacks. Some of the main risks of a manufacturing company taking out a business loan include:
When a manufacturing company takes out a business loan, they are agreeing to repay the loan according to the terms and conditions of the loan agreement.
This means that the company will have regular, ongoing repayment obligations, which can be a significant financial burden.
If the company is unable to make the required loan payments, it could default on the loan and face serious consequences, such as legal action or damage to its credit score.
Interest and fees
Most business loans come with interest and other fees, which can add to the overall cost of the loan.
This can be a particular concern for manufacturing companies, which often have large capital expenses and may need to take out significant loans to fund their operations.
It’s important for a manufacturing company to carefully review the interest rate and fees associated with a loan before agreeing to it, to ensure that they are comfortable with the total cost of the loan.
Loss of collateral
If a manufacturing company takes out a secured business loan, they may be required to provide collateral to secure the loan.
This could be equipment, property, or other assets that the company owns. If the company is unable to make the required loan payments and defaults on the loan, the lender may be able to seize the collateral to recoup their losses.
This can be a significant risk for a manufacturing company, as it could result in the loss of valuable assets.
Business loans can be a valuable source of financing for manufacturing companies, but it’s important for companies to carefully consider the risks and potential drawbacks before taking out a loan.
It’s also important for companies to carefully manage their loan repayments and avoid defaulting on the loan, to minimize the risks and ensure the long-term success of the business.