Manufacturers can be profitable on paper and still feel cash constrained. Materials, production costs and payroll must be covered before customers pay their invoices, while inventory may sit for months before it becomes revenue. In some manufacturing businesses, roughly 40% to 60% of annual revenue is tied up in inventory and other non-cash assets. Creating a persistent gap between work completed and cash available.
Talk to a Now specialist about your manufacturing working capital needs.
Working capital for manufacturers can be accessed without pledging equipment, real estate or inventory by activating outstanding customer invoices. This approach connects available cash to completed work rather than requiring the business to secure financing with physical assets.
The right strategy depends on how your production cycle, inventory commitments and customer payment terms interact. Before evaluating ways to improve liquidity, it helps to understand why manufacturing operations create a working capital gap in the first place.
Why manufacturers face a working capital gap
Manufacturing growth can consume cash before it produces cash. A company may purchase raw materials, pay production staff and cover operating costs months before a finished order generates a customer payment. The result is a timing gap between the money leaving the business and the money returning to it.
Inventory absorbs cash before a sale
Manufacturers must often hold raw materials, work in progress and finished goods to keep production moving and meet delivery commitments. Across the industry, roughly 40% to 60% of annual revenue can be tied up in inventory and other non-cash assets according to Now’s manufacturing financing analysis. That capital remains unavailable for hiring, equipment upgrades, new contracts or other growth priorities until inventory is sold and collected.
Inventory also carries forecasting risk. Even well-run manufacturing companies may see 20% to 30% of inventory become dead or obsolete, according to research cited by CBH in its working capital guidance. When demand changes, specifications shift or a product reaches the end of its useful market life. The cash invested in those goods may not return at its original value.
Receivables extend the cash-to-cash cycle
After a manufacturer delivers an order, the invoice may remain unpaid under the customer’s payment terms. During that period, the manufacturer has already funded materials, labor and fulfillment but cannot use the invoice value for immediate operating needs. Working capital reflects this liquidity position because it includes current assets such as inventory and receivables alongside short-term liabilities as PNC explains.
Seasonality can widen the gap further. Some manufacturers build three to six months of inventory before a peak-demand period to prepare for expected orders. Suppliers are paid during the build, while customer collections may not arrive until production and delivery are complete. Managing working capital for manufacturers therefore means covering this cash-to-cash cycle without slowing production or turning every growth opportunity into a balance-sheet constraint.
How collateral requirements limit traditional financing for manufacturers
Traditional bank financing can look straightforward on paper, but the approval process often depends on assets a manufacturer may not have available to pledge. Banks commonly require substantial collateral, and smaller manufacturers can struggle to access traditional bank capital as a result. PNC notes that small manufacturers may access working capital more efficiently through alternatives to traditional methods.
Asset-based lending illustrates the problem. The amount a business can access is tied to the value of specific assets, such as equipment, real estate or eligible inventory. A manufacturer with a large, well-established equipment base may be able to meet those conditions. A growing company that leases its machinery, operates from rented space or carries specialized inventory may have far less collateral that a lender will accept.
Growth does not always create pledgeable assets
Manufacturers can need additional capital long before they accumulate the assets required for traditional approval. A new contract may require more raw materials, additional labor or production capacity before the customer pays the resulting invoices. The business may be growing quickly, yet its most valuable resources are tied up in work in progress. Receivables or future production rather than in real estate or owned equipment.
This mismatch can be especially restrictive for small and medium-sized manufacturers. Research from the National Institute of Standards and Technology’s Manufacturing Extension Partnership describes reliable capital access as important across the business lifecycle. From early-stage operations through periods of sustained growth. Capital needs do not disappear when a company reaches its next stage. They often become more time-sensitive as orders, staffing and production commitments increase.
Collateral can narrow the options when liquidity matters most
Even when a manufacturer owns qualifying assets, pledging them can make the financing less flexible. Asset values may not match the timing or size of a current cash need, and specialized equipment may be difficult to value or sell. Inventory can also fluctuate with demand, production schedules and customer specifications. When the available collateral does not align with the working capital gap, a strong order book may not translate into usable cash.
For manufacturers without sufficient equipment or real estate to pledge, the issue is not necessarily a lack of revenue opportunity. It is a structural mismatch between how traditional financing is underwritten and how manufacturing businesses generate cash. A solution that activates invoices rather than requiring equipment or property can address that mismatch more directly.
Using invoices to access working capital without collateral
Manufacturers often have substantial value tied up in completed work that has not yet been paid for. A customer invoice represents a documented receivable, but it does not become cash until the customer pays according to the agreed terms. Invoice-based financing gives manufacturers a way to activate that receivable sooner, without pledging production equipment, real estate or inventory.
Turn approved invoices into usable cash
Instead of evaluating only the company’s fixed assets, this approach focuses on the quality of its outstanding business-to-business invoices. Once an approved invoice is submitted, the manufacturer can receive access to cash linked to that receivable while the customer continues to follow the original payment schedule. The result is a more direct bridge between delivering an order and having the cash to fund the next one.
This can be especially useful when a manufacturer must purchase raw materials, cover payroll or accept a new production opportunity before an earlier customer payment arrives. The invoice itself is the asset being activated. That helps manufacturers manage liquidity without collateral through alternative financing methods. Including invoice financing and revenue-based financing, rather than waiting for equipment or property to support an approval decision. Invoice financing can provide a fuller explanation of the process.
Protect flexibility as production cycles change
Asset-backed facilities can be restrictive when a company’s available collateral does not grow at the same pace as its order book. Invoice-based access can align more closely with actual sales activity. As eligible invoices are issued. Manufacturers can use those receivables to support near-term cash needs without tying up assets that may be needed for production, expansion or future investment.
The structure and total cost still matter. Finance leaders should review how fees are calculated, what invoices qualify and how customer payment risk is handled. A flat-fee invoice financing model can make the cost easier to forecast because the charge is established upfront rather than changing over time. For manufacturers seeking working capital for manufacturers without asset collateral, the right solution should improve cash availability while preserving operational control and financial visibility.
Revenue On Demand: off-balance-sheet working capital for manufacturers
Manufacturers often have substantial value tied up in inventory and receivables. Industry guidance cited by Now estimates that roughly 40% to 60% of annual revenue can sit in non-cash assets. Which can make it difficult to fund production, accept larger orders or manage seasonal demand without pledging equipment or real estate.
Activate the invoice, not the balance sheet
Revenue On Demand gives manufacturers a way to access cash tied to approved invoices while keeping the financing tied to the invoice itself. The invoice is the only asset activated. You do not need to pledge machinery, inventory, property or other equipment collateral to use the program.
This structure is designed for companies that want to accelerate payment on completed work rather than take on a traditional borrowing arrangement. Revenue On Demand is not a loan and does not create debt. It is an off-balance-sheet, flat-fee solution that can help align cash availability with the manufacturing cycle, from purchasing materials to covering payroll while customers pay on net terms.
Predictable pricing and customer-payment protection
Pricing is transparent and based on the customer’s payment terms. For 30-day terms, the flat fee is 2.75%, so your team can evaluate the cost of accelerating a specific invoice before proceeding. There is no variable interest calculation to track.
Revenue On Demand also uses a non-recourse model for customer payment risk. If your customer’s nonpayment results from insolvency or bankruptcy, Now absorbs that loss. The protection does not cover fraud, bad faith or a breach of your agreement, so accurate invoices and compliant business practices remain essential.
Now has paid more than $1 billion to over 1,000 U.S. businesses. For manufacturers seeking working capital without traditional borrowing, Revenue On Demand offers a way to put receivables to work without adding equipment collateral or reshaping the company’s balance sheet.
How to choose the right working capital strategy for your manufacturing business
The right option depends on what is constraining growth: available collateral, funding speed, predictable costs or the effect of new financing on your balance sheet. Working capital management requires balancing the need to keep current assets moving with the cost and risk of securing capital. A tension documented in academic research on financial management. Research on working capital strategy can help frame that decision.
| Option | Collateral needed | Cost structure | Funding speed | Off-balance-sheet treatment | Repayment impact |
|---|---|---|---|---|---|
| Asset-based lending | Usually tied to eligible inventory, receivables or equipment | Fees and financing charges vary by facility and collateral quality | Often slower to establish because assets must be reviewed and monitored | Generally remains on the balance sheet | Requires scheduled repayment and may reduce flexibility during a production cycle |
| Invoice factoring | Primarily supported by qualifying invoices rather than equipment or real estate | Usually based on a fee or discount applied to invoices | Can be faster once invoices and customers are approved | Depends on the provider and structure | Payment is connected to receivables, rather than a fixed installment schedule |
| Bank line of credit | May require collateral, guarantees or strong financial history | Variable pricing and account fees may apply | Can be efficient after approval, but underwriting may take time | Generally remains on the balance sheet | Draws must be repaid, which can compete with inventory and payroll needs |
| Revenue On Demand | Uses approved invoices as the asset being activated, without equipment collateral | Simple, flat fee rather than a variable rate structure | Designed to accelerate access to revenue from approved invoices | Structured as an off-balance-sheet alternative | Does not add a scheduled repayment obligation in the way a conventional facility does |
Traditional bank options can be difficult for smaller manufacturers when available collateral does not match the amount of capital needed. Bank financing commonly requires substantial collateral, which can put equipment, property or other operating assets into the approval conversation. That tradeoff matters when the company needs to preserve capacity for production and expansion.
Invoice-based options may be a better fit when the business has completed work, issued invoices and is waiting on customer payment. They can release cash already earned without requiring the company to pledge machinery or real estate. For a broader framework, review these ways to increase working capital without a loan and compare additional manufacturing cash flow solutions.
The final test is strategic: will the funding structure help the company meet current obligations while preserving resources for new equipment, product development or larger orders? Reliable access to capital supports innovation and sustained growth across the manufacturing lifecycle, according to the National Institute of Standards and Technology. Choose the option that solves the immediate cash gap without creating a larger constraint on the next stage of growth.
Frequently Asked Questions
What is working capital for manufacturers?
Working capital is the difference between a company’s current assets and current liabilities. For a manufacturer, it helps cover operating needs such as materials, production, payroll and supplier payments while customer invoices remain outstanding.
How can manufacturers improve working capital without collateral?
Manufacturers can use invoice financing to access cash tied up in unpaid receivables without pledging equipment, real estate or inventory. The invoice serves as the asset being activated, which can help support liquidity while preserving flexibility for the rest of the business.
Why is working capital important for manufacturing growth?
Reliable working capital helps a manufacturer purchase materials, maintain production schedules and accept new orders without waiting for every customer invoice to be paid. It can also make it easier to prepare for seasonal demand and fund growth without disrupting day-to-day operations.
How does Revenue On Demand work for manufacturers?
Revenue On Demand allows a manufacturer to receive revenue from approved invoices for a simple, flat fee. The arrangement is off-balance-sheet and does not require equipment collateral. It is non-recourse if the customer becomes insolvent, subject to a fraud or bad-faith carve-out.
Ready to explore working capital options?
Manufacturing businesses need working capital solutions that fit how revenue moves through their operations. A conversation with Now can help you assess whether Revenue On Demand fits your goals without centering the discussion on equipment or property collateral. Schedule a free consultation to discuss working capital for your manufacturing business, or contact us through the form to get started.