Trade finance · Manufacturing
Trade finance for manufacturing
Manufacturing finance is capital equipment lending combined with working capital for raw materials, covering CNC machines, presses and packaging lines as well as the gap between buying stock and being paid for finished goods.
How trade finance works for manufacturing
Trade finance funds the gap between paying an overseas supplier and being paid by your customer. For a manufacturer importing steel, resin, electronics or components, a facility can settle the supplier at shipment and give you 90 to 150 days to convert and sell. It effectively lengthens your supplier terms without asking the supplier for anything. Facilities are usually revolving and sized against import volumes. Currency movement is a real risk over a 120-day cycle, so discuss hedging with your bank alongside the facility.
The cash-flow pattern we plan around
Cash out for raw materials, then weeks of work in progress, then 30–60 day terms on finished goods — a cycle that lengthens as the business grows.
What manufacturing typically fund
- CNC machines, lasers and press equipment
- Packaging and materials handling lines
- Raw materials and imported componentry
- Forklifts and factory logistics
- Factory fit-out, power upgrades and compliance works
Trade finance for manufacturing: the numbers
| Typical amounts | $50,000 – $5,000,000 |
|---|---|
| Term | 2–6 months |
| Indicative rates | 9% – 20% p.a. |
| Repayments | Each drawdown repaid in full at the end of its term |
| Speed | 1–3 weeks to establish, then 24–48 hours per drawdown |
| Documents manufacturing usually need | ABN, GST registration and two years of financials · Supplier quote or proforma invoice for the machine · Debtor ledger and aged receivables report |
Rates are indicative, change without notice and depend on the lender, product, asset, term and your credit profile at the time of application. They are not an offer of finance. Comparison rates, where shown, are true only for the example given.
Key terms
Manufacturing equipment finance
Manufacturing equipment finance is secured lending for production machinery such as CNC machining centres, laser cutters and packaging lines, often structured to fund supplier progress payments and to commence repayments on commissioning.
Working capital cycle
The working capital cycle is the time between paying for raw materials and receiving payment for the finished goods made from them, during which the business funds the value of that inventory itself.
What is trade finance?
Trade finance is short-term funding that pays a supplier for goods at the point of order or shipment, with the borrower repaying the financier once the goods are sold. It is typically a revolving limit with drawdown periods of 60 to 180 days.
What is a letter of credit?
A letter of credit is a bank undertaking to pay an overseas supplier once specified shipping documents are presented. It gives the supplier payment certainty and gives the buyer assurance that payment only happens when the shipment is properly documented.
Trade finance vs invoice finance
Trade finance funds stock before you sell it; invoice finance funds the receivable after you have invoiced. Importers frequently run both, so the facility covers the full cycle from purchase order to customer payment.
Questions from manufacturing
How do manufacturers finance machinery that is built to order overseas?
Progress payments to the manufacturer are funded through a trade finance facility or by the equipment lender, and the whole amount converts to a chattel mortgage when the machine is installed and commissioned. Tell your broker the payment schedule early so the structure is in place before the deposit is due.
How do manufacturers fund raw materials and work in progress?
Trade finance pays suppliers for raw materials with 90 to 180 days to repay, invoice finance advances against finished goods invoices on 30 to 60 day terms, and a line of credit fills the gaps. Together they fund the whole cycle from materials to payment, and the facilities grow with turnover.
Can I release capital from machinery I already own?
Yes. A sale and leaseback or refinance secured on unencumbered CNC machines, presses, lasers and lines can release 60 to 80 per cent of their valuation for working capital or expansion, with the machines staying on your floor. Lenders like recognised brands with strong secondary markets.
Does a supply contract help a manufacturing finance application?
Yes. A contract or purchase orders from a major customer for the product the machine will make are strong evidence of earnings and often move an application from a deposit to no deposit, or from full financials to a lighter assessment. Include them with the machine quote.