New bill would increase access to capital for small manufacturers – Supply Chain Dive

by admin on July 16, 2019

Dive Brief:

  • Representatives Tim Ryan, D-Ohio, and Tom Reed, R-NY, introduced the Strengthening Investment to Grow Manufacturing in America (SIGMA) Act this week saying it would increase access to loans for small manufacturers and provide incentives for them to grow.
  • The bill would decrease the guarantee fees small manufacturers have to pay on loans, increase the maximum loan guarantee rate to 90% and increase the 504 loan limit to $10 million. The current loan guarantee rate is 85% and the current 504 loan limit is $5.5 million for manufacturing businesses.
  • “Access to capital to modernize plant equipment to take advantage of the revolution in digital manufacturing, to innovate new products, or to scale their business is a serious challenge for many small U.S. manufacturers,” Information Technology and Innovation Foundation President Rob Atkinson said in a statement.

Dive Insight:

This legislation would also get rid of some of the requirements for startups that might be looking for financing by amending a rule requiring a business operating for less than two years to pay 15% of project financing, lowering it to just 5%.

It also requires the Small Business Administration to expand its assistance to small manufacturers by partnering with other organizations, such as business development centers.

This bill comes at a time when the U.S. manufacturing sector feels relatively uncertain about the current climate. Many U.S. manufacturers rely on China for raw materials and the ongoing trade war has complicated their operations.​ The Trump administration has tried to bring more manufacturing back to the U.S., but many manufacturers say this would be difficult and time consuming.

The A.T. Kearney reshoring index, which measures the proportion of imports to domestic manufacturing output, was down for the third year in a row. The same report noted manufacturing output was down 150 basis points from December 2018. Still, data from the U.S. Bureau of Labor Statistics shows manufacturing output during the first quarter of 2019 is higher than it has been for much of the last decade.

June was the third straight month in which the Institute for Supply Management Purchasing Managers Index declined. It is still at a level that indicates growth — 51.7% — but at a slower rate than before. “Demand expansion ended, with the New Orders Index recording zero expansion, the Customers’ Inventories Index remaining at a too-low level, and the Backlog of Orders Index contracting for the second straight month,” Tim Fiore, the chair of the ISM Manufacturing Business Survey Committee, said in a statement.

Even at a slower expected rate of growth, this is enough to give manufacturers confidence to invest in capital expenditures. ISM’s June report shows capital expenditures rising again, and an ISM report from the fall said capital expenditures in the manufacturing sector were expected to increase 6% throughout 2019.

But investing in upgrades to operations and facilities can be hard in such an uncertain climate, so the SIGMA legislation could be welcomed as a financial boost for some small manufacturers.

“We believe the additional support of affordable loans and incentives for small manufacturers will not only grow our small manufacturers but also promote advanced technology integration,” Intelligent Manufacturing Systems Managing Director Dan Nagy said in a statement. “This bill will help small manufacturers remain competitive as stand-alone companies and secure their positions in supply chains.”

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