The questions manufacturers actually ask, in the words they ask them. Three sentences each. Links to the full guide where three sentences are not enough.
Cash Flow
My quarter was profitable. Why is the account empty?
Profit is booked when you invoice. Cash arrives when the customer pays. The 30 to 60 days between them comes out of your account, and a growing quarter widens the gap rather than closing it. The full math.
How long is a manufacturer's cash conversion cycle?
Typically 60 to 150 days. Production runs 30 to 90, customer terms add 30 to 60, and collection usually lands past the terms. Your figure is the sum of your own three, not the median.
I need to buy steel today for a job paying in 90 days. What funds that?
PO financing funds materials against a confirmed order. Factoring funds the receivable after you invoice. Together they cover the full cycle, front and back. Raw materials financing.
Inventory & WIP
My inventory is worth $2M. Why does my bank only lend $200K against it?
Bank appraisal formulas discount work-in-process heavily and raw materials substantially, because a half-finished assembly has no ready market. Asset-based lenders who understand your sector appraise closer to real value. The gap between the two appraisals is the whole conversation. What banks will not lend against.
Will a lender advance against work-in-process at all?
Some will. An asset-based facility built for manufacturing advances against receivables, raw materials, WIP, and equipment as one collateral base. Advance rates differ by line, and the WIP rate is where lenders separate.
Equipment
The machine pays back in 14 months. Why does the bank need 6 months to decide?
Bank credit committees assess the borrower's history. The payback assesses the machine's output. Those are different questions, and the 6 months of production you lose waiting is the real cost of the mismatch. The 14-month payback.
Should I lease or finance equipment?
Finance when the machine outlives the term and the capacity is permanent. Lease when the technology turns over faster than the payback, or when the contract requiring the machine is shorter than the machine's life.
Orders & Contracts
I turned down a $3M order because I could not fund the materials. What should I have done?
PO financing funds materials and production against a confirmed order, before any invoice exists. The order qualifies the financing rather than your balance sheet qualifying it. The competitor who took that order was financing better, not building better. The contract manufacturer's capital trap.
How do PO financing and factoring work together?
PO financing covers pre-delivery, funding the production. Factoring covers post-delivery, converting the invoice. A $300K PO facility funds the build, and factoring against the $500K invoice funds the receivable after delivery. PO financing for manufacturers.
Cost and Fit
Is factoring a sign the business is in trouble?
No. Factoring converts an asset you already earned into cash you already need. Manufacturers who factor tend to be growing faster than their bank line, which is a capacity problem rather than a health problem.
When is alternative financing the wrong answer?
When the gap is structural rather than timing. If the job is unprofitable at the quoted price, faster cash funds the loss faster. Fix the quote before financing the cycle.
What does factoring actually cost a manufacturer?
The fee is a percentage of invoice value against the days outstanding. The number worth comparing is the total cost against the margin on the order the cash lets you accept. A structure costing [X%] to capture a [Y%] margin job is arithmetic, not a rate shop. Cost mechanics: FactoringInsider.com.
Still not answered
The guides run these questions all the way down. Start with the one matching your gap.