Powering Production: Overcoming Capital Challenges in Manufacturing

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In our recent seminar, “Powering Production: Overcoming Capital Challenges in Manufacturing,” industry experts tackled the financial hurdles that small to mid-sized manufacturing businesses face in Australia. The panel, led by Nicholas Samios from Hermes Capital, included David Mansfield (DEI), Gary Tescher, (Promentor), and Josh Hallowell (Pickles), each bringing unique insights into funding, restructuring, and asset management.

Key Challenges in Manufacturing Finance

The discussion began by addressing common financial challenges, especially for family-owned enterprises and SMEs. These businesses often struggle with:

• Asset-heavy operations: Manufacturing requires significant investment in equipment, which can be a barrier for businesses when capital is tight or machinery needs updating.
• Inconsistent cash flow: Long lead times and high upfront material costs lead to cash crunches, especially when payment terms from customers are extended.
• Capital access issues: Traditional banks may hesitate to lend to businesses with a limited track record or specialized equipment, creating a funding gap for these manufacturers.

Practical Solutions and Strategies

The panel explored solutions to these challenges, from asset-based lending to restructuring options:

• Understanding and Valuing Assets: Josh Hannay discussed the importance of regularly assessing equipment value, including surplus items that could be sold to free up capital.
• Streamlining Production: Gary Tesar shared examples of manufacturers optimizing production processes and reducing waste to cut costs, particularly when new equipment isn’t feasible.
• Early Intervention and Restructuring: David Mansfield emphasized that timely restructuring and maintaining clear communication with stakeholders, especially banks, can prevent severe financial distress and preserve business value.

The Future of Manufacturing in Australia

Panelists noted the growing demand for niche, high-value manufacturing, such as medical and defence products, which allows Australian manufacturers to compete despite high labour costs. However, government support was highlighted as critical for fostering growth and innovation in the sector.

Watch the full recording for a deep dive into these discussions, including practical strategies to navigate financial challenges and leverage existing assets in the competitive manufacturing landscape.

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