30 Oct Funding Sustainable Manufacturing With Alternative Financing
Manufacturers aren’t strangers to the growing demand for environmentally responsible practices. Sustainability is a modern business imperative. You might already have a roadmap for lowering emissions or reducing water usage. Or you might have vendors lined up to help you reengineer your packaging or electrify your fleet.
So what’s the missing step between these intentions and action? For many industrial business owners, it’s financing. Green initiatives require funding, which can feel out of reach when traditional lenders aren’t supportive. That’s where alternative lending brokers for manufacturing can bridge the gap between your ideas and long-term sustainability.
The Limits of Traditional Lending
Traditional banks often don’t understand the nuances of manufacturing needs, especially when funding green initiatives. They want to fund a project that directly increases revenue, but many green initiatives bring long-term savings and future value. Traditional loan criteria limit the lender’s ability to fund sustainability projects.
The Alternative Lending Difference
Alternative loan providers are known for funding businesses and projects that traditional lenders turn down. They have a higher tolerance for risk and assess companies based on growth potential and innovative plans rather than credit scores.
This approach makes a big difference when your manufacturing business invests in sustainability. Alternative lenders understand that front-loaded expenses for green initiatives come with longer-term returns. They’re more willing to fund environmentally conscious companies and adjust your financing to your project’s timeline.
Advantages of Non-Bank Funding for Sustainability
When you invest in green initiatives at your manufacturing business, you future-proof your operations and expand your growth potential. Using alternative financing to fuel sustainability efforts opens the door to additional advantages.
Faster Access to Capital
Sometimes, you can capitalize on your green initiatives only if you move quickly. You may want to take advantage of a limited-time government incentive or rebate. Or maybe your business and your customers are in a good spot to make sustainable changes.
Unlike the months you might wait for a traditional loan, you can secure capital through alternative financing in weeks or even days. That speed means you can fund your initiatives when the time is right for your business.
Say your beverage manufacturing business in Cook County, IL, could qualify for the Businesses Reducing Impact on the Environment (BRITE) grant if you improve your water efficiency in a few months.1 You could secure the funds in a few days through a trusted alternative business lender in Chicago and update your system well before the assessment deadline. Fast financing would support your sustainable changes and financial plans.
Funding Fitted to Your Business Model
Each business in the manufacturing industry functions differently. Consider two manufacturing companies, one a business-to-business (B2B) and the other a business-to-consumer (B2C) model, that both want to implement sustainable packaging solutions. Because the B2B business deals in large shipments while the B2C company sends smaller packages more often, they will need different financing options to meet the same goal.
Alternative lenders offer a variety of funding solutions so you can fit your financing to your business model. These non-bank financing products include asset-based lending (ABL), equipment financing, mezzanine debt, invoice factoring, and revenue-based financing. Each solution can support your business and initiatives in different ways.
For the sustainable packaging example, the B2B company could use equipment financing to invest in recycling machinery, while the B2C business might launch a single-box marketing campaign using revenue-based financing. Alternative lenders offer funding products to support each manufacturing company’s sustainability goal and business model.
Flexible Loan Terms
You might wait months to see a return on your green initiative or immediately cut expenses with sustainable changes. Each project’s timeline is different. You don’t want restrictive loan covenants or misaligned repayment schedules that make it hard to cover costs or run your business as you want.
Say you’re launching a new eco-conscious product line and predict your furniture manufacturing business will see a return in five months. If your loan term is too long, you make payments long after the increase in revenue. And a super short repayment schedule means you have to repay the loan before you see a return.
Alternative loan brokers can help you pick the right financing product and offer flexible loan terms to align with your green initiative. For a five-month return on sustainable furniture, they might suggest a short-term business loan with interest-only repayments for the first month. Revenue-based financing might offer the flexible repayment option you need. With alternative financing, you protect your plans and finances while funding your sustainability goals.
Protect Your Equity
Green initiatives might be part of your growth phase or to prepare for your next investment round, but that doesn’t mean you’re ready to give up ownership right now. Non-traditional financing can help you access significant capital and retain your equity.
Alternative lenders offer millions of dollars in funding through business bridge loans and mezzanine loans for small-to-medium enterprises (SMEs) taking on large-scale projects. Maybe you are retrofitting your facilities or replacing your fleet with low-emission vehicles. You can fund your sustainability efforts through alternative financing without turning to investors.
Build Personalized Capital Stacks
Long-term sustainability goals can be complicated, especially as manufacturing regulations change. However, a financing plan tailored to your operational blueprint can support your initiatives for the long term. You need to build personalized capital stacks through alternative funding solutions.
Using nontraditional loan products, you can optimize your debt and equity financing mix to support your goals. Alternative loan brokers can connect you to various lenders and private investors to fund different projects and expand your network. Through the loan options and financier relationships, your capital stack can be a solid foundation for all your green initiatives.
The Future is Green
Sustainability is the future. Customers are more conscious of the environmental impact of the products they buy. Large retailers increasingly require their suppliers to meet sustainability benchmarks. Regulatory agencies are also tightening emissions requirements and incentivizing clean energy adoption.
Your manufacturing business doesn’t have to fade into the background because of funding concerns. With alternative financing, you can take control of your financing and stay competitive in a greener future.
1https://www.cookcountyil.gov/BRITE