India is gradually becoming a manufacturing centre, thanks to government efforts such as the Make in India scheme. The production and manufacturing business is only growing, thanks to increased investment in this sector.
According to Trading Economics, the manufacturing and production sectors contribute 75.5 percent of the country’s total industrial output, accounting for 18 percent of GDP.
India is expected to attain its full potential in three decades, thanks to the demographic advantage of a huge workforce. While the manufacturing industry contribution to the economy continues to expand, owners of manufacturing companies need to raise extra funds for expansion and growth.
So, how well-equipped is the financial sector to finance loans for manufacturers?
A manufacturing environment has its own quirks. One manufacturing company differs from the next. Manufacturing can be classified into three categories: perishable, semi-perishable, and non-perishable. The cash flow cycles of different manufacturing enterprises are influenced by their business cycles. Oxyzo Financial Services has business loans for every type of manufacturing company and stage of the cash flow cycle.
In India, there are various viable financial solutions that can be used as business loans for manufacturers. Manufacturers must know various working capital loans in order to choose the best financing solution. They must also know the qualifying and repayment conditions, as well as the interest rates, in order to effectively manage such advances.
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The following is a general summary of the working capital loans that can be obtained for a manufacturing company.
Term Loans – Loans for a specific period of time
Term loans, which are available in both secured and unsecured forms, are an efficient way for a manufacturing company to fund its investment needs. These funds are available to manufacturers as short, medium, and long-term loans with varying amounts and other features.
While short or midterm loans are possible to get approved, the quantity of money available is limited. As a manufacturing unit, you’ll need to mortgage your assets and take out long-term loans to get high-value financing.
Working capital loans
Working capital loans are common business loans for Indian manufacturers, and they help them meet their day-to-day operational needs. You can get this type of finance for purchasing raw materials or meeting day-to-day business needs. The loan amount under this financing option is limited, and it cannot be used for anything other than working capital needs in the manufacturing industry.
Equipment finance, which is primarily geared to meet the financial needs of manufacturing companies, allows them to purchase expensive equipment that is essential for operating efficiency, improvement, or expansion.
Lenders offer this type of loan for manufacturers in lieu of a mortgage or hypothecation on the equipment to be purchased. As a result, there’s a chance you’ll lose the asset if you can’t pay back the loan.
Invoice financing, an innovative method of satisfying a company’s liquidity needs, might be a good fit for manufacturers with large outstanding debtors or bill receivables. The agreement permits them to raise the finances needed to purchase raw materials and continue producing the goods.
A manufacturing company may seek finance for a variety of reasons:
- For the acquisition of raw commodities
- Equipment/machinery purchase
- The acquisition of a manufacturing establishment
Use Oxyzo’s smart financing solutions to achieve the lowest cost of capital, capital structure, and business leverage possible. Get a flexible manufacturing business finance based on cash flow cycles and company features.