For most metal manufacturing companies, growth is not produced by a single, massive investment or jump in demand. It is a gradual process with many stages, almost like a giant to-do list. The business must consistently acquire new resources and implement new strategies to improve efficiency and stabilize cash flow. This doesn’t just happen overnight, or even over the course of one season. These changes are made at an almost sporadic pace, occurring at different times of the year. Small businesses with this type of spending pattern are often recommended to choose a business line of credit as their additional funding option. With a business line of credit, you can cover your desired expenses when you need to and keep your customers satisfied, regardless of the hurdles that may be coming your way.
Here are four valuable uses for a business line of credit in the metal manufacturing industry:
1. New Equipment
Equipment has a tendency to break or go out of date. You don’t have to be in the manufacturing business to understand that the timeline for the latter scenario is definitely a lot shorter these days. But manufacturers cannot afford to lose productivity or fall behind schedule because they don’t have the proper equipment to meet today’s standards for efficiency. You can avoid such misfortunes by investing in preventative maintenance or simply replacing the pieces of equipment that are vital for maintaining the quality of your products. Up-to-date equipment also decreases the risk of liability cases or other related lawsuits.
When you have an equipment financing option like a business line of credit at your disposal, you can replace equipment before it begins inhibiting productivity. You may have heard that equipment upgrades are eligible for state and federal tax rebates. This depends on the kind of upgrade, so you should speak to your accountant before assuming you’ll be able to write off your desired expense.
2. Improve Shipping Efficiency
If your company delivers products on a truck, you should certainly explore different shipping and handling options. Think back to how many times you’ve had something mailed to you in a box that was way too big. Well, had that company chosen a more appropriately-sized box, it would have been able to pack more boxes onto a truck and probably save a lot of money on gasoline. Odds are, your business does not package and deliver the same quantities of products as a popular online retailer. But there are plenty of investments you can make to save on shipping and handling costs. You could purchase a new truck that is larger or better on gas, or buy cheaper packing materials. Even small changes to your shipping process could have a major impact on your annual shipping costs.
3. Increase Staff
One of the most common functions of a business line of credit is covering payroll. Manufacturing companies are constantly expanding their teams. In addition to increasing manpower on the factory floor, they must seek new salespeople and marketers to attract new customers. Unlike other industries, virtually every new employee of a manufacturing company is hired to increase efficiency or productivity in a relatively short period of time. A business line of credit is designed for short-term investments. So, until they begin to finance themselves, you can use a business line of credit to cover compensation for your new employees.
4. Seasonal Changes In Demand
The companies that are best suited for a business line of credit are frequently prone to fluctuations in revenue. A strong busy season will be followed by a potentially hazardous slow season. With a business line of credit, you can ensure the likelihood of a strong busy season and avoid having to lay off employees when business slows down. Many UCS clients use business lines of credit to order bulk quantities of materials to handle an upcoming surge in demand. They might use their funds to launch a marketing campaign that tells their customers that they are capable of completing orders at higher speeds than their competitors.
A big reason for a manufacturing company to avoid layoffs during the slow season is the time it takes to train new employees. Even the most attentive training process cannot guarantee that a manufacturing worker will be up to speed by the time demand picks up. These orders must be filled promptly to revitalize cash flow, so you can’t have new employees slowing down the rest of the team. A business line of credit allows you to cover payroll during slow periods and keep your experienced employees on staff. Work will flow smoothly when those orders start coming in.
Cash Flow Issues Are An Inevitability
Tumultuous demand often results in tumultuous cash flow, which can make it very difficult to be approved for any type of small business loan. Companies like United Capital Source, however, are well-aware that in some industries, extreme ebbs and flows in cash flow are an inevitability, as opposed to a reflection of the business owner’s intelligence or work ethic. We regularly work with companies that require extra working capital to carry them over speed bumps leading into busy periods. The more profitable these busy periods are, the smaller the speed bumps will be. Uncontrollable factors shouldn’t stop you from accessing a business line of credit, and they won’t if you choose a business financing company that is not deterred by the reality of cash flow.