Money talks: Bakers have options with financing

BACK TO ALL NEWS

Money talks: Bakers have options with financing

16 Oct 2025

Mari Rydings

Mari Rydings is a versatile content creator, editor and marketer with experience developing dynamic, results-driven materials for B2B and B2C audiences. As the editorial director for Avant Food Media, she leads the day-to-day editorial operations for the company’s print and digital magazines, newsletters and social media platforms. Outside of work, she loves reading, hiking, putting together jigsaw puzzles and spending time with her husband and their twin daughters.

LAS VEGAS — Whether it’s expanding a business or investing in new machinery, determining the best strategy for securing financing can be complex.

As part of the recent International Baking Industry Exposition’s education programming, the American Bakers Association, a co-owner of the triennial event, and Secured Finance Network sponsored the session, Financial Strategies in Baking Manufacturing, featuring a panel of three banking industry experts.

To kick off the session, the panelists outlined the four primary revenue-based banking segments:

Small business | $1 million to $25 million
Business banking (emerging middle market) | $25 million to $75 million
Middle market | $75 million to $2 billion
Corporate banking | More than $2 billion

“All segments offer two types of lending: cash flow and asset-based,” said Bobby Bans, managing director and western region sales manager at Wells Fargo Capital Finance. “With cash flow lending, banks look at your profits before taxes, depreciation and amortization. With asset-based lending, banks lend against your accounts receivable: inventory, equipment, real estate, and in some cases, intellectual property.”

Asset-based vs. cash flow lending

In today’s uncertain economic environment, tariffs and price fluctuations can make it challenging for small-volume bakers to lock in the funding they need.

“If you’re going to survive those types of volatility, you must have a lot of liquidity, whether that’s cash on the balance sheet or availability under your line of credit,” said Michael Scolaro, managing director, head of asset-based lending at BMO Commercial Bank. “On top of that, you must work with the banks to hedge your product and lock in prices. That’s super important.”

When fluctuating costs cause significant earnings swings, Scolaro recommended exploring asset-based lending vs. cash flow lending, especially for low-margin businesses.

“Banks lend on the value of your inventory,” he explained. “Asset-based lending provides the difference between the borrowing base and the loan amount. As long as there’s a surplus, the bank won’t test the covenant every quarter like cash flow lenders will.”

Finding a lender

Picking the right lender is just as important as picking the right type of financing. The first rule of thumb is to choose someone who understands the specific business and its needs.

“You want to test the market, but it comes down to your comfort level with a banker understanding your business, the input costs, the stresses the business faces, and your expansion plans and capabilities,” Scolaro said. “Who do you trust?”

“Baking will be much more capital-intensive in terms of putting equipment in and much less labor-intensive because robotics are going to upskill a lot of the workforce. If you don’t make the investments, you’re going to be behind.” — Michael Scolaro | managing director, head of asset-based lending | BMO Commercial Bank

Traditional banks are not always a viable financing option. A fast-growing company that lacks a proven track record or a business with past performance issues may need an alternative option, such as a specialized independent lender.

“We step in when banks are not quite there,” explained Kevin Cox, head of capital markets at White Oak Commercial Finance. “We can offer more financing availability and liquidity than a bank for a slightly higher spread. We can provide the funds to automate lines, add new lines and help bakers support new contracts with big retailers or wholesalers.”

AI and robotics are expected to alter the banking — and baking — landscapes over the next five years.

“Baking will be much more capital-intensive in terms of putting equipment in and much less labor-intensive because robotics are going to upskill a lot of the workforce,” Scolaro predicted. “If you don’t make the investments, you’re going to be behind.”

Advertisement

BACK TO ALL NEWS