The furniture-making industry continues to grow along with the advancement of the equipment used in it. So, to catch up with the latest technology in equipment such as CNC machines, you might want to consider getting a CNC machine loan.
Acquiring new equipment is rarely budget-friendly. Even companies that have been in business for around 3 years can still find themselves struggling to buy new equipment.
However, this shouldn’t hinder your aim to acquire updated equipment to help your business out, like CNC machines.
Getting quality equipment doesn’t mean you should shell out a huge amount of your money all at once, though. Most businesses would want to find other options that can prevent them from experiencing cash flow problems.
This is where a CNC machine loan comes in handy.
Think of it this way—you’ll be able to purchase a CNC machine with a CNC machine loan without having to drastically reduce your working capital for your business in an instant. Your CNC machine can even begin generating revenue to pay the CNC machine loan off on its own.
However, you need to think a CNC machine loan through before even applying for one. Remember—you will be paying off your CNC machine loan over time.
So, if you need tips on financing a CNC machine loan, you’ve come to the right blog!
What to Remember When Applying for a CNC Machine Loan
A lot of businesses already use CNC machines to improve the quality of their production, including furniture-making businesses. Technological advances aim to aid workflow, after all.
Since you’re considering acquiring a CNC machine through a CNC machine loan, you’d want to go with the best deal that you can find. Luckily, there are several reminders that you can keep in mind when applying for a CNC machine loan.
Tips on Financing a CNC Machine
A CNC machine loan is a loan you obtain from a lender in order to buy a CNC machine. It’s something businesses get when they would rather finance something that depreciates and pays cash for things that appreciate.
You can get a CNC machine loan from various sources. These include local banks, credit unions, and equipment financing companies.
For a business that has been in the furniture-making industry for about 3 years, you’ll probably get your loan from an equipment financing company. That’s because they’re quicker to approve equipment loans like CNC machine loans than local banks and could have the same low rates as banks. They typically ask for less down and have more flexible payment options.
However, no matter which lending institution you choose to approach, you still need to get an idea of what your monthly payments are going to be. Doing so can help you make a business plan for the CNC machine loan first.
So, remember the following when getting a CNC machine loan:
Maximize Your Business Cash Flow
There can be instances where businesses outright buy new CNC machines with cash. For businesses that have been in operation for years, this is often possible because of their regular cash flow.
However, proper financing and a CNC machine loan can still benefit older businesses. As mentioned before, this is because a CNC machine loan can help you keep enough capital on hand to use on other expenses. If you can invest your cash back into your company and your internal rate of return using your own cash is greater than 10% then invest your cash back into your business and utilize cnc equipment financing.
Being prepared for other financial commitments also helps make a CNC machine loan feel lighter. So, prepare a financial forecast in order to see how a CNC machine loan will affect your overall cash flow.
You should also be ready for financial changes that can happen during different times of the year. So, aspects such as seasonal changes should be considered. One day you might get a big customer order and you have to use cash to buy all the inventory to make the order happen. If you wasted all your cash on the equipment you're SOL.
Remember, the best way to determine how you can pay for your CNC machine loan is by knowing how and when your equipment will generate income. You can use that income to pay for the equipment loan, so consider that when projecting your loan payments.
Bundle the CNC Machine Loan
While your main goal with a CNC machine loan is to acquire a CNC machine, you should still take advantage of your loan opportunity. Just because you’re aiming for one specific machine doesn’t mean you shouldn’t check if you can snag other assets along with it.
So, you should aim to package related equipment together with your CNC machine for a better financial deal. These bundles could even include maintenance or services that can be handy in the long run. Equipment finance companies can even pay for your sales tax and shipping.
This could also keep down the long-term cost of ownership and maintenance. That, in turn, could help tip the balance in your favor when you apply for a loan with a lender.
Choose the Best Equipment Lender for Your Situation
As mentioned before, there are various lenders that you can approach for a CNC machine loan. While there are various choices, they often have different approval requirements and benefits.
So, you should look for the one that best suits your circumstances. This could be in terms of how much and how often your payments will be or even what benefits they can give you during your loan.
An easy way to find the best lender for your business is to compare CNC machine loan packages and deals across equipment lending companies. This way, you can have a clear view of the pros and cons of choosing a lender.
Try to Get A No Obligation Equipment Finance Pre-Approval
While choosing a lender to partner up with, you should also try to get a no obligation equipment finance pre-approval for your CNC machine loan. Getting an equipment finance pre-approval before looking for a CNC machine actually lets you know what your business can afford to look for. If you know what the monthly payment you want to budget for a month you can plug it into this calculator to see how much equipment that payment will offer you.
When you're pre-qualified with an equipment finance company, you won’t have to go through the hassle of finding a different CNC machine after finding out that you actually can’t afford the one you picked out first. It also helps set your expectations accordingly, while still leaving room to afford a bit more.
Knowing you have the money up front with equipment financing can give you more negotiating power and try to get end of quarter specials from the manufacturer.
Getting pre-approved can also make importing the CNC machine easier. If you're buying equipment overseas an equipment finance company can still finance it but you'll have to pay the overseas vendor to get them to ship it and once the equipment arrives on US soil the equipment lender can refund you the money after an inspection has been done.
Benefits of CNC Machine Loans
Now that you know more about what to do when setting up a CNC machine loan, you might be asking yourself why you should go through it in the first place.
Is there any real value to getting a CNC machine loan when compared to just outright using your working capital to buy a CNC machine?
Firstly, many furniture production lines become more efficient with the help of CNC machines. However, CNC machines can be costly, even for businesses with stable cash flow.
Luckily, a CNC machine loan can help you obtain a CNC machine without setting your business cash flow in disarray. And that’s just one of the many benefits of getting a CNC machine loan for your furniture business.
Loans Make It Easier to Grow Your Business
You usually have to outlay a large amount of capital to grow your business. Expanding your production or distribution range costs money, for instance.
Now, you could consider getting a CNC machine as a production expansion. However, buying new machines is usually among the most costly business growth expenses.
With a CNC machine loan, you won’t have to foot the bill by yourself and all in one go. You’ll be able to set up terms of payment that you can gradually pay off in easy-to-manage installments. Equipment lenders offer fixed monthly payment terms from 12 - 84 months. One payment up front is typical all though no payment up front and no payments for 90 days is common as well.
That, in turn, makes business growth less risky. It means you won’t have to work with lower operating capital than usual because you didn’t shell out all your money for a CNC machine.
You also don’t have to work with lower emergency cash reserves.
Some Lenders Give Extra Assistance
Now, this obviously won’t apply to all lenders, but it does to the best equipment finance companies. These equipment finance companies can make your CNC machine loan experience a lot more bearable.
Companies such as Trust Capital will actually help you make the most of your loan. They can offer businesses flexible CNC machine loan options and various benefits that a business might need. You can add 25% of the cost of the CNC equipment onto your loan as working capital. You can also get 100% financing including warranties, sales tax, shipping and installation.
This assures both you and them that the loan is going to be invested in a way that will boost your income.
Trust Capital also offers different finance products to fit your commercial needs. These include refinancing existing business and recapitalizing your business using your existing assets.
With the right equipment finance company, you can have a lot of financial aid, depending on your business status. Along with that, you can have beneficial offers that other lenders can’t give you.
Equipment finance companies such as Trust Capital even give you the option to apply online to get pre-approved for a CNC machine loan.
The Machines Are Tax-Deductible
Lastly, financed CNC machines you use for business are actually tax-deductible. This is due to Section 179 of the IRS Tax Code.
They also have tax advantages that correspond to the law of H.R.1 or The Tax Cuts and Jobs Act. These tax advantages include the deduction limit for Section 179 that has been increased to $1,000,000 for 2019 and beyond.
Since less of your business’s income is now being taxed, you get to take home higher profits. That’s in addition to enjoying higher revenues thanks to the improved production you likely got from getting new equipment through a CNC machine loan.
Final Thoughts on Applying for a CNC Machine Loan
In this blog, I talked about tips on getting a CNC machine loan and its benefits. With these pointers, you can take the first step towards acquiring a CNC machine through a CNC machine loan.
Always remember that you need to properly prepare for a CNC machine loan. Your preparations should be well-thought-out, starting from assessing your business and cash flow to finding a financial partner to help you out.
Properly preparing for a CNC machine loan and making the most out of it can help set up a lighter payment period for you in the future. Companies like Trust Capital can even help make sure that you’re setting up a CNC machine loan term that is best suited for your business status.
So, if you're ready to Apply for a CNC equipment loan. We invite you to call Trust Capital and speak with a CNC equipment lease specialist that can offer you a no obligation equipment loan approval with a soft credit pull, run payment scenarios for you and go over your tax benefits at 866-458-4777.