Are you planning to acquire machine tools?
You should be careful in acquiring machine tools. Most machine tools are expensive, so purchasing them outright can cause financial instability.
With that said, it’s best if you consider other options to acquire the machine tools you need. Particularly, think about making use of machine tool finance.
Machine tool finance can help you acquire the machine tools you need.
But to get the best out of it, you need to use it properly and that’s what we’re going to talk about.
In this blog post, we will talk about tips for purchasing tools so you can use machine tool finance properly.
Tips for Purchasing Industrial Machine Tools
If your company has limited capital, you can use machine tool finance to increase your buying power. Machine tool finance will help you acquire the necessary machine tools for your operation.
But as I said earlier, it’s best to use it properly. Here are some tips for purchasing industrial machine tools.
Tip #1: Evaluate Your Business
To use machine tool finance, you must first evaluate your business. Know your objectives before you start planning to buy certain machine tools.
Think about your business goals and why you’re going to buy machine tools. Are you planning to increase your productivity? Or are you planning to improve the quality of your operations?
The right set of tools depends on the needs of your business. Avoid buying machine tools just because you saw a good deal or were influenced by a colleague.
Doing this can help you use machine tool finance properly.
Get Opinions from Investment Advisers
To properly use machine tool finance, you need to get opinions from investment advisers too.
Investment advisers will perform a cost-benefit analysis of each machine tool you’re considering. This can help in determining if buying certain machine tools can give a good return on investment.
Several factors will be considered including available storage, employee usage, and current resources. Manufacturing companies are also advised to use an asset utilization ratio.
This can help in using machine tool finance because it measures your ability to get the best results from equipment or machine tools.
Tip #3: Acquire Essential Machine Tools Only
Also, you must acquire only essential machine tools. This is the best way to avoid wasting your machine tool finance.
Never acquire tools that are only useful for short-term operations. Instead, acquire machine tools that are useful in the long run.
Acquiring only tools that you need long-term can save you money and assures a return on investment.
Purchasing tools that you only need for a brief period of time can be a waste of money. It’s more likely that they’ll be stocked in the storage room until you have projects that require those specific tools.
That’s not how you use machine tool finance properly.
Tip #4: Weigh Cost vs. Quality
Using machine tool finance properly also requires you to weigh cost vs. quality.
Focus on the initial price, especially if you have a tight budget.
Remember, the price of industrial machine tools is the most important factor. So always pick or acquire industrial machine tools that have a reasonable price.
Expensive machinery has good quality and it’s often built to last. It’s more likely that you’ll spend less on repairs.
Apart from that, expensive machinery also has greater precision. It can improve the quality of your operations.
Don’t invest in a top-quality machine if you’re only going to use it occasionally. Just always use your machine tool finance to acquire necessary equipment at a reasonable price.
Tip #5: Consider Buying Used Industrial Machine Tools
Another way to use your machine tool finance is by buying used industrial machine tools.
Keep in mind that it’s not necessary to buy brand-new industrial machine tools to ensure good quality. It’s possible to find used machinery that’s in near-mint condition. Their are machinery auctions often and you can utilize machinery financing at auctions and used machinery dealers.
Also, you’ll get more from your machine tool finance if you do this. You can acquire good quality second-hand machine tools at a much cheaper price.
Just be sure to always inspect the second-hand machinery in person before buying it. This is needed so that you have a good idea of the condition. There are reputable machinery consignment dealers that sell used machinery that can help.
Tip #6: Look for the Best Machine Tool Vendors
You also need to look for the best machinery vendors to buy used equipment from and use machine tool finance properly.
There are lots of machine tool vendors, especially on the Internet. But not all of them are reliable.
Some of them offer the best equipment and machine tools while others sell substandard ones.
With that said, it’s really hard to tell which company is the reliable one. Even testimonials and reviews on the Internet can be faked easily.
So never use the machine tool’s price as a basis. Don’t let a seemingly impressive price fool you. Even substandard equipment and machine tools can have a hefty price tag.
It’s best to check newsletters targeting specific industries and attend trade shows where you can get some hands-on time with equipment. Also, get advice from colleagues on where to get the best machine tools. You can always find a good deal when a company goes out of business and needs to sell of their equipment.
When you buy from a dealer you should be able to get a warranty, check different vendors’ warranties and guarantees.
Look for vendors with better post-purchase services. If a vendor offers technician visits to your site in case of repairs, for example, that’s usually preferable. This ensures you that your machine tool finance won’t go to waste.
Tip #7: Know How to Acquire Your Machine Tools
Apart from using machine tool finance, you can also use your capital to purchase machine tools. But this move is risky.
Spending your working capital can cause cash flow problems because most machine tools are expensive. Fortunately, machine tool finance can help with that problem.
However, there are also other ways to acquire machine tools that you should consider. Each of them has its own advantages and disadvantages.
Make sure to be careful in choosing the right method of acquisition. The right choice depends on your business’s situation.
Acquire Machine Tools through Equipment Leasing
Equipment easing is one of the popular methods of acquisition. Unlike purchasing, it doesn’t require a huge down payment.
Though this seems the best option always, it’s only best to use if you need the equipment or machine tools for a short period of time. You can simply return the asset once you’re done with it or purchase it.
If you need it for a long period, you may end up spending as much as you would have if you had bought the tool instead.
Types of Equipment Lease Agreements
There are different types of equipment lease agreements. The popular choices are FMV (fair market value) and $1 Buy-out.
Both FMV and $1 buy-out leases have benefits. FMV has lower monthly payments and it’s also the better option if you don’t want to retain the equipment at the end of the lease term.
The leased equipment does not appear on the company’s balance sheet. This allows you to deduct the monthly lease payments as an operating expense.
Also, the typical FMV lease lasts from 12 to 60 months.
On the other hand, the $1 buy-out is the right equipment lease agreement if the equipment retains its value even after a long time. It has fixed monthly payments.
At the end of your contract, you can purchase the equipment for $1. Acquiring equipment through a $1 buyout lease agreement will give you section 179 tax benefits too.
It’s even possible to deduct the entire cost of the leased equipment as a business expense in the first year of purchase.
Financing Your Machine Tools
Financing is the best option if you’re going to use the equipment for a long period of time. Unlike equipment leasing, you own the machine tools right away.
Other than that, financing saves your capital as well. You can use the saved capital to finance other aspects of your business.
You can get financing from a bank but it requires a lot of paperwork. Typically a full financial package including tax returns and business financial statements. Also, there’s no assurance that your application will be approved. Banks are strict in giving loans. Banks will typically put a blanket lien on your business.
It’s best to get financing from equipment finance companies like Trust Capital. They offer different financing solutions like no payments for the first three months and step down payments to lower your total out of pocket cost.
Furthermore, the company has a single page application on their website and offers fast approvals. You can get the funds from machine tool finance very quickly. They offer approvals application only up to $150,000 for start ups and application only up to $350,000 for companies over three years in business and application only up to $500,000 for companies over five years in business.
Final Thoughts on Machine Tool Finance
In this blog post, we talked about machine tool finance and tips in acquiring industrial machine tools.
Most industrial machine tools are very expensive. Many companies can’t afford them with cash or realize it's better to finance or lease the machines for tax and cash flow purposes.
That’s why they consider different options to acquire the tools they need for their operations. Usually, manufacturing companies acquire their machine tools through equipment financing. particularly, they use machine tool finance.
Machine tool finance increases their buying power. It helps them acquire the machine tool they need for their operations.
If you have more questions about machine tool finance, contact Trust Capital at (866) 458-4777.