Magal Engineering, which designs and manufactures automotive components for global names including Jaguar Land Rover, Ford and Daimler, secured the loan from Finance Birmingham after winning a contract to manufacture parts for Jaguar.
The automotive giant will use the components in engines being made at its new £500m i54 plant in Wolverhampton.
To operate at full capacity for the contract, Magal required finance for a suite of tools to make the components – the cost of which would be reimbursed by Jaguar Land Rover once full production began.
The loan was secured from the national £24m Tooling Funding Programme, part of the government's Regional Growth Fund.
Magal chief executive Gamil Magal said: "Magal's ability to supply components to Jaguar relied on our ability to acquire new tools and take on more staff.
"Finance Birmingham’s loan will enable us to deliver this contract efficiently and on time. This is a new step forward for Magal, which will help us to realise our future as an integral part of the UK’s growing automotive sector."
Steve Hetherington, tooling investment director at Finance Birmingham, advised Magal and helped to prepare the company's bid for the loan.
He said: "The strength and reputation of the UK’s automotive industry continues to gain momentum, providing new opportunities for its suppliers.
"Magal's new contract with Jaguar highlights how expertise within the automotive supply chain is winning work and creating new jobs. The Tooling Funding Programme is open for business and we hope to help many more companies achieve these goals."
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