A plastics manufacturer in Ohio has been leasing their 40,000 square foot facility for 11 years. Monthly lease: $18,500. The landlord offered to sell the building for $2.8M.
They went SBA 504. Put 10% down — $280K instead of the $700K a conventional bank would require at 25% down. Monthly mortgage payment: $17,400.
That's $1,100 less per month than their lease. They went from renting to owning for less money.
But they didn't stop there. They added $1.5M in CNC equipment through a separate equipment financing line. New 5-axis machines that doubled their production capacity.
Total capital stack: $2.5M SBA 504 for the building + $1.5M equipment financing = $4M total. Their combined monthly payment for the building and new equipment is still less than what the lease plus their old equipment payments would have been.
That's what smart manufacturing financing looks like.
Why Manufacturers Are the Strongest Commercial Borrowers
In our network, manufacturing loans have some of the lowest default rates across all industries. There are reasons for that.
Revenue is predictable. Manufacturers have purchase orders, contracts, and recurring customers. A plastics company making parts for automotive OEMs has 12-month contracts with Fortune 500 buyers. That's not speculative revenue — it's contracted income.
Equipment holds value. A CNC machine, an injection molder, a packaging line — these assets have real resale value. If something goes sideways, the lender has collateral worth 60-80% of the original purchase price. Compare that to a restaurant where the "equipment" is a used fryer worth $2K.
Growth paths are clear. Manufacturers can expand product lines, move upstream or downstream in their supply chain, go direct-to-consumer, add shifts, automate processes. Every one of those growth paths requires capital — and every one has clear ROI math behind it.
Manufacturing Facility Financing Options
Here's what's available right now through our commercial financing network:
| Loan Type | Amount Range | Product | Down Payment | Rate | Term |
|---|---|---|---|---|---|
| Buy leased facility | $1M-$5M | SBA 504 | 10% | 6-7% fixed | 25 yr |
| New plant construction | $3M-$15M | Construction + perm | 15-20% | 8-9% | 18mo + 25yr |
| Equipment fleet | $500K-$5M | Equipment financing | 5-10% | 6-10% | 5-10 yr |
| Working capital for PO | $250K-$2M | Working capital/LOC | 0% | 10-18% | 6mo-10yr |
| Competitor acquisition | $1M-$10M | SBA 7(a) + stack | 10-15% | 7-9% blended | 10-25 yr |
The SBA 504 line is the one most manufacturers miss. 10% down, fixed rate, 25-year term for facility purchases. If you're leasing your plant, run these numbers. Almost every manufacturer I've shown this to is shocked at how much they save.
SBA 504: The Most Underused Product in Manufacturing
Let me be blunt. If you're a manufacturer leasing your facility and you haven't looked at SBA 504, you're overpaying every single month.
SBA 504 was designed for exactly this: owner-occupied commercial real estate. It splits the loan into two pieces — a first mortgage from a conventional lender (50% of the purchase price) and a second mortgage from an SBA-backed CDC (40%). You put up 10%.
On a $2.8M facility:
- Your down payment: $280K (10%)
- First mortgage (50%): $1.4M from conventional lender at ~6.5%
- CDC loan (40%): $1.12M from SBA at ~6% fixed for 25 years
- Blended monthly payment: ~$17,400
Compare that to a conventional commercial mortgage at 25% down ($700K) and 7.5% over 20 years. Monthly payment: ~$20,100. You're paying $2,700 more per month AND you tied up an extra $420K in down payment.
SBA 504 saves you $420K upfront and $32K per year in payments. Over 25 years, that's not a rounding error.
Structure your facility financing.
See What You Qualify For →Section 179 at Manufacturing Scale
This is where the tax math gets serious.
A $2M equipment purchase with $200K down. You finance $1.8M. Under Section 179, you can deduct up to $1.22M in the first year (2026 limit), plus bonus depreciation on the remainder.
At a 37% tax rate, a full $2M deduction saves you $740K in federal taxes. In the first year.
Your equipment financing payment might be $35K per month. Your tax savings in year one: $740K. That's 21 months of payments covered by the tax benefit alone.
This is why smart manufacturers time their equipment purchases carefully. Buy in Q1, get the full year of depreciation, use the tax savings to accelerate paydown or fund the next expansion. Your CPA should be part of every equipment financing conversation.
For specifics on maximizing equipment deductions, check our Section 179 breakdown for large equipment purchases.
Here's What Most People Get Wrong
Manufacturers lease their facility for decades when SBA 504 would let them own it for less per month.
I get it. Leasing feels simpler. You write a check, the landlord handles maintenance, and you focus on making parts. But you're building the landlord's equity instead of your own. After 11 years of $18,500/month lease payments, that Ohio manufacturer had paid $2.4M to a landlord. Owned nothing. Had no equity. And their rent was about to go up.
Now they own a $2.8M building, they're paying less per month, and they're building equity at $8K per month in principal paydown. In 10 years they'll have $1.5M in equity — money that came from payments they were already making.
The second mistake: buying equipment with cash when financing is cheaper after tax benefits. If Section 179 saves you $740K on a $2M purchase and your financing costs $400K in total interest, you're $340K ahead by financing. Cash in the bank earns 4-5% in a money market. Deployed into more equipment or inventory, it earns 20-30% ROI. Don't tie it up in assets you can finance at 7%.
Bobby's Take
Manufacturing is our strongest sector for large loans. And I'll tell you exactly why.
Manufacturers have predictable revenue, valuable equipment as collateral, and clear growth paths that lenders can underwrite with confidence. A manufacturer buying their building and adding a production line isn't speculating — they're scaling a proven business with contracted customers.
If you're a manufacturer still leasing your facility, run the SBA 504 numbers. Seriously. Grab your lease agreement, pull up the commercial funding calculator, and compare. You'll be shocked at how much you save — both monthly and over the life of the loan.
And if you're sitting on a purchase order you can't fill because you don't have the equipment capacity, that's not a financing problem. That's a missed revenue problem. Equipment financing at 7-8% on a machine that generates 25% ROI is the easiest math in business.
The manufacturers who grow fastest are the ones who treat capital as a tool, not a cost. Finance the building. Finance the equipment. Keep your cash for inventory and operations. Let the assets pay for themselves.
Frequently Asked Questions
Can I buy my leased facility with an SBA 504 loan?
Yes. This is one of the most common SBA 504 uses for manufacturers. You need to occupy at least 51% of the building. The process takes 45-60 days from application to closing. Your landlord doesn't need to offer below-market pricing — SBA 504 works at fair market value.
How much equipment financing can a manufacturer get?
Equipment financing is typically based on the equipment's value, not your revenue. Most lenders finance 90-100% of equipment cost for manufacturers with 2+ years in business and decent credit. For a fleet purchase of $2M+, expect 5-10% down with terms of 5-10 years depending on the equipment's useful life.
What's the difference between SBA 504 and SBA 7(a) for manufacturers?
SBA 504 is specifically for real estate and large equipment — fixed rate, 25-year term, 10% down. SBA 7(a) is more flexible and covers acquisitions, working capital, and mixed-use projects up to $5M. For a facility purchase, 504 almost always wins on rate and terms. For buying a competitor's business, 7(a) is the right tool.
