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Starting a Car Manufacturing Company with Middle Market Financing

Posted On: August 14, 2020 author Paul Kendall

Are you planning to start a car manufacturing company?

A car manufacturing company is part of the middle market industry. It involves a lot of money and risks. That’s why many car manufacturing owners are cautious, especially during their startup phase.

The startup phase is the most crucial part of your car manufacturing company’s history in the united states. The way you handle this phase can determine the future of your business.

Thus, you should ensure that operations during the startup phase go smoothly. To do that, you must hire the best employees and use reliable equipment.

However, you need lots of money to be able to do those things.

Do you have enough working capital to support those expenses?


I know that not all business owners have enough working capital to support the expenses of their startup car manufacturing  of electric vehicles business. That’s why today, we’ll talk about middle market financing and how it can help in starting a car manufacturing company.

How to Start a Car Manufacturing Company?

 

The process of starting a car manufacturing company is almost the same as the process when starting other types of businesses. The only thing that’s different is how you can get additional funds to secure your operations.

We’ll talk about that later in this blog post because the first thing you need to do is to make a concept car.

 

 

Starting a Car Manufacturing Company with Middle Market Financing - car manufacturer

 

Make a Concept Car

 

It's hard to achieve success if your car company doesn't have something new to offer. That’s why you should offer something that other companies don't have.

You need to think of something that the automotive industry currently lacks. Offer innovations that'll benefit both old and young drivers.

In other words, contribute to the future of the automotive industry. For example, invest in driver-less cars.

This is a good route to take with your product and service concept because many investors are interested this type of car. Pioneering this technology can therefore assure you better chances of middle market financing.

What’s more, it can assure you a good chance of profits. For instance, you can attract ride service companies (like cab companies) if you have driver-less cars.

That's because driver-less cars eliminate the cost of hiring human drivers. This allows the business to operate with low costs and high efficiency.

Furthermore, driver-less cars bring the possibility of cheap and convenient transport to commuters. That means consumers themselves will be driving demand for the product.

So being the first company to sell driver-less cars would open up a lot of opportunities. Provided your concept of a driver-less car is sound and produces a workable prototype, you can look forward to a good future for your company.

But your concept and prototype won’t be enough to secure middle market financing, naturally with 50 million of financing option. You also need to prove to investors that you can manage the business side of things.

In other words, you need to make a business plan as well.

 

Make an Effective Business Plan

 

After building a prototype, the next step is to make a business plan.

As I said before, a car manufacturing company is part of the middle market industry. It'll require middle market financing -- which involves a large amount of money.

It's important to plan every step you'll take. This ensures that your capital structure or investments won't go to waste.

Aside from that, a business plan can also help you with goal-setting. But make sure that your business plan is realistic so it can secure the middle market financing you need.

Base your business plan on your expectations for the first 5 years of your company.  It should address all aspects of your car manufacturing company’s operation, including the following:

  • Its operating costs.

  • Your projected profits.

  • Details about employees (the number of needed employees, needed positions, and the required skill level).

  • Your corporate structure.

  • Your government compliance plans.

 

Many financial investors look at a business plan before they give monetary support. So always make a detailed business plan before approaching potential backers. Remember that investors check the business plan to ensure that they'll get a return on investment.

Also, middle market financing investors typically only give financial support to legitimate businesses so that they do not have to undergo any financial crisis. So make sure that your company is perfectly compliant with the law before you look for an investor.  

Register your car company to make it legal. File patents for intellectual property such as designs, names, slogans, and proprietary technology.

If you’re missing any of these documents, you may not be able to secure middle market financing.



 

Starting a Car Manufacturing Company with Middle Market Financing - car financing

Financing Your Car Company

 

Not all business owners have the necessary capital to start full operation of their car company. Some of them use their available working capital to operate on a small business scale at first instead.

Though having a small operation is a wise decision, it can't guarantee a huge success. It's more likely that you'll only just break even instead of making a profit.

With that in mind, it's best if you look for additional funds. Many car manufacturing owners are doing this so they can operate at full capacity from the start. They borrow working capital to support the expenses of their operations.

 

In other words, they look for middle market financing.

 

Some business owners get additional funds from local banks. However, banks rarely give business loans to a startup car manufacturing company.

That’s because middle market financing involves large amounts of working capital for businesses. In the case of a startup car manufacturing company, you need at least $10 million for your startup phase to go smoothly. Research and development can last 2- four years.

It's hard to borrow that amount of money from a business finance bank -- especially if you have no collateral to offer.

So, since getting a business loan from a business finance bank isn't an option, you may have to consider looking for middle market financing from other sources. For example, you could try equity investors and the top equipment leasing companies.

 

Look for Equity Investors

 

Equity investors are the best source of additional funds while you are developing your concept and prototypes.

 

Many equity investors usually give middle market financing to startup companies with a plan. This ensures them that they will get a return on their middle market financing investment.

If you do get an equity investor, you can do much more with your company. You can make better prototypes if you have enough funds. You can hire more employees or rent a better facility.

Additionally, having enough funds allows you to hire designers and engineers with experience in the automotive industry. They can help you create more concept cars that'll get the interest of your target consumers and even more investors. It's best to find designers and engineers from other manufacturing players in the Michigan, Ohio and Illinois area. 

Though equity investors can give you some middle market financing, you can't rely on them through the rest of your endeavor. The middle market financing they provide isn’t always enough to begin your operations.

In most cases, for example, you’ll still need to get more funds to acquire manufacturing equipment.

Getting More Funds From Equipment Financing Companies

 

Equity investors don’t usually give you enough funds to acquire the machinery and equipment you need for manufacturing.

Fortunately, middle market financing companies can help you with this problem. In fact, many startup car manufacturing companies get the money they need from middle market financing companies and utilize equipment leasing options.

Most equipment leasing companies offer middle market financing even to startup businesses. Middle market financing is a type of loan that gives the borrower up to $100,000,000.00

You can use middle market financing to acquire costly equipment for car production, like these:

  • Conveyor belt.

  • Welding robot.

  • Painting robot.

  • Bin transport robot.

  • Overhead conveyor.

  • CNC machine.

  • Jig welder.

  • Engine machining station.

  • Air wrench.

  • Spot welder.

  • Hand tools.

  • Press machines

 

You can borrow $100 million from middle market financing companies as long as you have a good business plan, equity injection, a good management team, collateral and a bank line. Equipment finance companies often give business loans to businesses with  good cash flow and huge upside potential.

Your large equity injection shows that you handle your responsibilities properly. This assures the middle market financing companies that you can repay the borrowed money.

Normally, you need to have extra hard collateral to get a big approval. But since you’re going to borrow a large amount of money, expect the equipment finance company to set a large down payment and a term of 24 to 36 months.

It’s best to make a partnership with a reliable and understanding equipment financing company like Trust Capital who has relationships with banks and private equity sponsors and lenders to get all the equipment financing you're looking for with the most competitive interest rates and terms.

Trust Capital gives equipment financing to every type of business. Aside from that, they also offer very low rates to middle market customers with only one payment due upfront and the potential to get a term up to 60 months.

Just make sure that your car manufacturing company will earn $100 million to $3 billion annual revenues. That's because aside from the credit history, Trust Capital only considers loan applications from businesses that have the potential of earning $100 million to $3 billion.

Payment Samples for Middle Market Financing

 

Trust Capital doesn't only offer the lowest rates possible. They also offer flexible payment options to help their clients keep a healthy budget without any junior debt.

To give you an idea, here are the possible monthly payments if you borrow $10 million with a good business credit line from a business finance bank.

Machinery financing with one payment up front, $1 buyout of equipment, here are the possible amounts of your monthly equipment lease payments:

  • $442,080.05 - 24 Months

  • $303,087.79 - 36 Months

  • $233,750.58 - 48 Months

  • $192,167.77 - 60 Months

 

If you choose to have an operating lease contract, here are your monthly equipment lease payments:

  • $425,402.26 - 24 Months

  • $286,425.58 - 36 Months

  • $216,951.21 - 48 Months

  • $175,277.69 - 60 Months

 

Final Thoughts on Middle Market Financing

 

A car manufacturing company is a profitable business. It allows you to have partnerships with other businesses or investors.

However, expect to face lots of challenges during your startup phase. First, you'll probably have a hard time thinking of what you can offer to the automobile industry. After that, the rest of your problems will involve money.

Since you have a startup company, getting additional funds will be harder than usual. Most business finance banks rarely approve business loans for startup manufacturing companies.

Also, the money you need to start a car company and its business operations is higher than for most manufacturing businesses.

A car manufacturing company is a part of the middle market industry. This means you need to have at least $10 million.

You can get funds from equity investors. However, the money that they can provide isn't always enough to support your operations.

So aside from getting funds from equity investors, make a partnership with an equipment leasing company as well.

The best equipment leasing company can offer middle market financing. Since middle market financing involves a large amount of money, it's best to make a partnership with a reliable equipment finance company like Trust Capital.

Trust Capital is a trusted and reliable equipment financing company that offers middle market financing. To know more about middle market financing, you can reach Trust Capital at (866) 458-4777.

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