Financing a New US Factory Beyond the Equipment Purchase

Signing the machinery purchase order is one milestone in opening a factory. The financing plan also needs to cover the period before the plant produces saleable output and collects from customers. For an Israeli company establishing a US operation, that period deserves its own budget.

SBA guidance on estimating startup costs separates initial expenses, required assets and cash needed to cover early operating deficits. That distinction is useful for an established manufacturer opening a new location as well.

Build an installation and operating calendar

Create a schedule from the first supplier deposit through commissioning and initial customer collections. Put machinery, freight, installation, premises work, testing and staff training on the same calendar as payroll, rent and materials.

Assign a person to confirm each major date. A production manager may have a different view of commissioning readiness from the equipment vendor. Resolving that difference before financing closes is easier than funding an unexpected delay later.

Separate equipment funding from operating cash

Assume a hypothetical plant needs $2 million of equipment and $300,000 for installation and premises work. Management also estimates $450,000 of cumulative operating cash deficits before collections support the business.

Even if equipment financing covers an assumed $1.6 million of the purchase price, $1.15 million remains to be funded before fees or contingency: $400,000 of equipment cost, $300,000 of other setup costs and $450,000 for operations. These are illustrative assumptions, not financing terms.

Show where each remaining dollar is expected to come from. Do not use an unapproved working capital line as a balancing figure.

Identify which business will borrow

For a cross border group, draw a simple ownership and operating map. Identify the entity buying the machines, employing staff, signing customer contracts and receiving revenue. Ask prospective lenders what information or support they require from the parent and the US operation.

Have your accounting and legal advisers address intercompany funding, ownership and documentation. A facility offered to one entity should not be assumed available to another.

Test a slower production launch

Build a second budget with delayed commissioning or lower initial output. Include ongoing expenses during the delay and any later customer collection dates. Agree in advance how the group would fund the additional need.

Equipment leasing and borrowing can have different ownership, payment and end of term arrangements. SBA guidance highlights the importance of comparing more than the purchase price when choosing a structure.

Lirodean can help evaluate the financing request across equipment and working capital needs. Contact us before committing to major orders so the proposed funding can be assessed against the complete launch budget.

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