Guide

Why do banks turn down manufacturers for loans?

Because manufacturing ties cash up in materials and work in progress long before an invoice is paid, which reads as poor liquidity even when the order book is full. A bank sees the ratio; a funder reads the deposits and the orders, and treats the machinery as separately financeable collateral.

Why the bank says no

The cash conversion cycle is brutal and entirely normal: buy materials, run the job, invoice, then wait sixty days. A bank looking at the ratios sees cash locked in work in progress.

A full order book does not fix it. Signed orders are not revenue on a bank's model, so the strongest evidence you have counts for the least.

Machinery is already financed in most shops, so it is encumbered and unavailable as security for anything new.

What each underwriter weighs

A BANKA REVENUE-BASED FUNDERPERSONAL CREDIT SCOREheavysomeCOLLATERAL TO PLEDGEheavynot looked atTWO YEARS OF TAX RETURNSheavynot looked atTIME IN BUSINESSheavysomeMONTHLY BANK DEPOSITSsomeheavyDEPOSIT CONSISTENCYnot looked atheavyINDUSTRY AND STATEsomeheavy
The same business, read two different ways. A bank decision is built on credit, collateral and filed accounts; a revenue-based funder builds it on the money moving through your account. That is the whole reason a bank decline says very little about whether you can be funded.

What a revenue-based funder reads instead

Deposits show that customers pay, which is the question. A sixty-day cycle repeated reliably across six months is evidence, not a warning.

Machinery gets its own financing at its own rate, because a press or a CNC has a resale market an underwriter can price. Funding equipment out of working capital is the expensive way to buy it.

Purchase orders and contracts are worth submitting. They are not underwritten directly, but they explain a working-capital request in a way statements alone cannot.

What to have ready before you apply

Six months of business bank statements.

Your order book or contracts in hand.

For equipment, the specification, the vendor quote and whether existing machines are financed.

Sources

Related questions.

Can I fund a large order I have not been paid for?
Yes. Working capital covers materials and labour on a job before the invoice settles, and it is one of the most common manufacturing uses.
Should I finance a machine or use working capital?
Finance the machine. It secures its own loan at a materially lower cost, and the term matches the asset's life instead of compressing into months.
Do purchase orders help my application?
Indirectly. Underwriting reads deposits, but a documented order book explains what the money is for and why the cycle looks the way it does.

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