Funding for Manufacturers
Funding for Manufacturers — Term Loans, Working Capital, Machinery Finance
Manufacturers have the most financing options but also the most complex needs — capex, working capital, machinery, raw material. Here's the structure.
The four-facility structure for manufacturers
Term loan (capex)
For plant, building, expansion. 5–10 year tenure. Bank/NBFC. Often secured against the asset being financed or other property.
Cash credit / OD (working capital)
Revolving limit against inventory + receivables. Drawing power = eligible current assets × lender's percentage. 12-month renewable.
Machinery finance
Asset-backed loan for specific equipment. Lender holds lien on the machine. Lower rate, tenure matches asset life.
LC / BG limits
Non-fund-based limits for procurement (LC for raw material imports) and contracts (BG for tenders). Saves cash outflow.
What lenders evaluate for manufacturer loans
- Last 3 years ITR — profit trend, EBITDA margin (10%+ healthy for manufacturing)
- GST turnover and reconciliation with ITR
- Banking — 12-month clean, AMB supporting proposed obligations
- DSCR — 1.5x+ for term loan; lender computes combined DSCR across all facilities
- Asset cover — total secured loans ÷ net owned assets; 1.33x+ preferred
- Stock and receivables statement (monthly for CC)
- Order book — pipeline of confirmed orders adds confidence
- CIBIL of business + promoters — 720+ preferred
- Environmental / pollution compliance for the industry
Best-fit lenders
Lender types for manufacturing
- PSU banks — lowest rates, slowest TAT, strictest underwriting
- Private banks — competitive rates, moderate TAT, moderate flexibility
- NBFCs — higher rates, fast TAT, flexible on collateral/sector
- Asset finance companies (Cholamandalam, Mahindra) — best for machinery
- CGTMSE — collateral-free up to ₹5 Cr; most lenders offer it
- All rates indicative; final rate at lender's discretion post-appraisal
FAQ
Common questions
Should I take one large loan or split across multiple facilities?+
Split almost always. A single ₹2 Cr term loan for capex + working capital is the wrong structure — you'll pay interest on idle working capital, and the tenure will be wrong for one of the uses. The right structure is usually: term loan for capex (5–10 years), CC/OD for working capital (revolving), machinery finance for specific equipment. Each facility matches its use.
My manufacturing unit runs 24/7 with high power cost — how do lenders view this?+
Lenders care about your unit economics — power cost as % of revenue, raw material cost, gross margin. If your power cost is high but your gross margin is healthy (15%+), it's fine. If power cost eats into margin, the lender will see weakness. Maintain a clean MIS that shows unit economics clearly — underwriters appreciate transparency.
Can I get CGTMSE funding for a manufacturing unit?+
Yes — manufacturing is one of the most eligible sectors for CGTMSE. Up to ₹5 Cr collateral-free, with the Credit Guarantee Trust providing cover to the lender. Most banks and NBFCs offer CGTMSE-backed loans. The processing is slightly longer (guarantee registration) but the absence of collateral requirement is a major advantage for new and growing manufacturers.
Next step
Get your file reviewed before you apply again.
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- No CIBIL pull until strategy is agreed
- No blind portal submissions
- Review by a senior advisor — not a call-centre agent
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