Setting up a large scale business will likely involve the purchase of industrial machinery. Getting the right equipment is absolutely a necessity in order to ensure the production process is carried out in the most efficient manner. In addition, other factors like the cost of acquisition of the machinery, industrial machinery financing, its quality etc. are also important. In this post, we highlight four simple tips you need to keep in mind when buying industrial machinery.
Always remember to check out multiple machinery suppliers. Just because you liked the first machinery you tested does not mean that you settle on it. Maybe you will find better equipment if you look for three or four more suppliers. Remember that your business will be using these machines for a long time. As such, the quality of the equipment together with its efficiency will play a big role in determining the profitability of your operations. By checking out multiple suppliers, you ensure that you only acquire the best-in-class machinery available in the market.
You should also consider the financing method you will use to acquire the equipment. Usually, you will have two industrial machinery financing options to choose from– equipment loans and equipment leasing. With loans, you will have full ownership of the equipment. However, you will be in debt and will have to ensure that you pay it off in full. In contrast, a lease does not give you complete ownership of the machinery. However, you will only have to pay the monthly installment of the lease. That’s it. You will also be able to end the lease whenever you want and acquire other machinery to replace the existing ones without any additional expense or loss. This essentially gives you a massive advantage over your competitors who might still be stuck using outdated machinery they have invested in.
Before you acquire the industrial equipment, it is very important that you double check its safety features. Since your employees are going to be using it consistently and you are responsible for their safety, it is highly recommended that you hire an expert and get the machinery thoroughly checked. This should give you a good idea of whether the equipment can be used in your workplace with little to no risk. In addition, the safety history of that particular equipment also needs to be checked upon. If the equipment has a long history of being involved in accidents where workers have been seriously injured, then you are better off avoiding it.
Finally, make sure to do a thorough cost-benefit analysis of the equipment before making the purchase. The benefit you get from operating the machinery should be higher than the money you spend on owning it. Else, the equipment acquisition would make no business sense. However, if the cost-benefit is not to your advantage initially but is projected to profit you within an acceptable time frame, then acquiring the equipment should still be considered a good move.
For business owners who are planning to acquire CNC equipment, leasing is the best way to improve their business performance without coughing up cash from capital funds. A business with good credit can easily get leasing contracts which allow for no repayments for the first three or six months.
The biggest way in which the CNC equipment leasing will improve a business is the way in which it makes the production process more efficient. Any product has to go through several stages before it gets to its final, saleable form. Every single step of this production process will require the usage of a machine that specializes in creating or handling individual components of the product. The less equipment a business has, the more inefficient the production process will be. The business will have to employ manual labor or resort to some other means to complement the other machines in the production cycle. And a business which is short of funds will have no choice but to resort to such inefficient manufacturing processes that will negatively affect their profitability. But with CNC equipment leasing, you can acquire as many machines as you can, thereby ensuring that your production process is efficient to the maximum.
A business exists to make profits. The more profits it earns, the better it is performing. And equipment leasing can play a big role in increasing the profit-making ability of a business. It does this by freeing up the capital that would have been locked-in if you had chosen to purchase the equipment outright. For example, you may have $90,000 as capital and may want to acquire machinery worth $50,000. Now, if you buy the machinery from your funds, you will essentially be only left with $40,000 as capital. However, if you opt for equipment leasing, the $50,000 can be preserved. You can then use this money for important business expansion strategies like client acquisition. This will give you more revenues, more profits, and a healthier, stronger business financials.
A business that is engaged in workpiece production will massively benefit from CNC equipment leasing. Since they can acquire machinery without sacrificing their capital, the business is free to add in as much machinery as it can. It need not limit itself to any particular niche of workpiece production. If the business sees that there is a better, more profitable opportunity available that requires the acquisition of new machinery, it does not have to pass it up because of a lack of funds. Instead, the business can acquire the CNC equipment through leasing and fully utilize the available opportunity. In addition, you don’t have to sacrifice the quality of the machine and buy a substandard one. The leasing option enables you to acquire the best possible machinery, no matter what it costs. As such, you will always be able to run your manufacturing processes in the best possible way.
The leasing industry offers a range of options to businesses looking for industrial equipment acquisition. While some equipment can be easily leased, certain equipment will be tougher to find a lease for. In this post, we will look at the top 10 industrial equipment that is often leased by vendors.
Packaging plays a big role in determining how well your product will be perceived by customers. And to this end, getting a high-end packaging equipment installed in your workplace is necessary. Several leasing companies offer contracts on packaging equipment. And this will allow you to pack your products in the best way possible without investing too much of your capital.
With a push towards constructing bigger buildings, equipment for the industry is also in huge demand. Cranes are especially sought after equipment in the construction industry given that they are used to basically lift all heavy things in the development area. So, if your business involves large-scale heavy lifting in any way, a crane may be necessary.
For people planning to set up a food manufacturing business, industrial ovens are a must. These large machines are heated to incredibly high temperatures and bake out raw food in just minutes. Without such large ovens, your food manufacturing business will be stuck with low production. Thanks to leasing, you can now acquire such large machines without burning a hole in your pocket.
All advanced factories will contain some form of robotic delivery systems. For example, a car manufacturing plant will have robots that will lift the parts of a car and put it in a designated place. Using human beings for this purpose will be highly inefficient.
A forklift is basically a vehicle that is used to lift and transport materials. These machines are largely used in warehouses to move goods from the storage area to the transportation area and vice versa. in manufacturing industries, they are used to transport products from the production area to the storage section.
CNC machines are used for cutting, drilling, and refining raw materials into parts of an end product. These machines are necessary for any business that deals with manufacturing. CNC equipment financing is a very popular way to obtain such machinery.
If your business has anything to do with construction, then a brick cutting machine will likely become necessary in order to streamline the entire process. This equipment will allow the workers to speed up their job, ensuring that more work gets done in less time. Firms whose weakest link in the construction process is the cutting of bricks will benefit massively from such equipment.
These are machines that connect one production machinery to another by transporting components between them. Any manufacturing business will require conveyor belt systems to achieve complete production automation. The equipment will provide you with complete control over whether to move the components slow or fast between the different phases of production, enabling you to adjust output according to the factory efficiency.
Businesses that are involved in mining will require equipment like longwall machines, roof bolters, scoops, haul trucks, draglines, and so on. With leasing, all such equipment can be acquired and put to use within a short period of time while keeping the initial capital safe and unused.
Among industrial equipment, assembly line machinery is one of the most common types sold to businesses. All factories, whether it be dealing with manufacture of a pen or a laptop, will need an assembly line production equipment for speedy production of goods.
Setting up a business that involves a lot of equipment purchases can be frustrating. You will have to search for the right equipment, reliable brands, value for money, and a number of other factors before you make the purchase. And the best way to acquire equipment is by financing it through an equipment lease.
If you had decided to buy the equipment outright, you would have had to use up a large chunk of your capital. But because you are acquiring it through financing, you can keep the capital unused. As such, you will be able to use up the money for other purposes like marketing and so on. And by using more of our capital for operational expenses rather than capital expenses, you will be able to net in a more immediate profit rather than having to wait for a long time from to profit from asset investments.
Since financing requires you to only pay a fixed amount every month to own the equipment, you will have an easier time budgeting your equipment acquisitions costs. As such, long-term planning that involves using such equipment can be accurately done with a very low margin of error. This ensures that your business achieves the cash flow and profit targets you have set out.
Investing in new machinery using company funds can be very risky. You need to have a good grip
A big risk of buying industrial equipment outright is technological obsolescence. So, you might buy a high-end equipment for your workplace today. But in five years’ time, new equipment with better technology might come into the market. But since you have invested heavily in the current equipment, you will be forced to keep using it for a longer period of time despite better options being available. Such technological obsolescence can be avoided if you opt for equipment financing. When you take out an equipment lease, you have the freedom to end the lease on an existing equipment and take out a lease on a new, updated equipment. This allows your business to always keep using the latest machinery and tools.
By choosing equipment financing, you will be saving a bulk of your capital for operational expenses that aid in the expansion of your business, avoiding expensive maintenance costs, and using all the latest machinery for the business. As such, you will always be in a better position to compete for a higher market share than your competitors.
For a business that seeks to run as efficiently and profitably as possible, it is necessary that they automate their production process using the best-in-class machinery. And equipment financing is a good way to make this a reality since it offers easy funding option for buying whichever machinery your business needs. In fact, equipment financing is a profitable solution for almost all industries.
Firms that deal with manufacturing industries will have to use a variety of machinery to improve their production efficiency and compete with their counterparts. In some cases, big machines are absolutely necessary, without which the business will not be able to operate. For example, firms which are engaged in packaging will need multiple equipment like conveyor belts, packaging units, and so on. Leasing companies will gladly fund eligible businesses for acquiring such equipment. Without equipment leasing, starting and running such manufacturing businesses will become highly cost prohibitive. The investment required in these machineries would run into several hundreds of thousands of dollars that the capital funds of the firm will get locked up in fixed assets and the business will be unable to properly manage its cash flows or invest properly in areas like marketing, client acquisition, and so on.
For an agriculturist, getting the right farming equipment is necessary if he is to get a good harvest. And the fact that farming requires a large number of tools, most of which can get quite expensive, only adds to the worries of the farmer. Some of the basic tools and machinery required for farming include trailers, tractors, grain carts, generators, seeders, and so on. Investing in so many machineries will only add to the pressure of running a farm and can easily stress out the finances, even leading to bankruptcy. But by leasing all these equipment, an agriculturist can avoid such headaches and focus on running his business more efficiently.
People who are planning to set up a restaurant business will also benefit greatly from leasing services. A restaurant will need machinery like large ovens, food processing equipment, food prep equipment, delivery vehicles, holding cabinets, and so on. Without such heavy-duty machinery, running a restaurant that caters to a large number of customers is virtually impossible. No amount of manual labor is capable of replacing the benefits offered by restaurant equipment. They can easily be acquired through a lease, which will ensure that you are able to set up your restaurant with least financing worries.
Setting up and running a construction business will require acquiring several heavy machineries like dump trucks, conveyors, bulldozers, forklift, CNC machinery etc. These machines do not come cheap. However, any new construction venture can acquire them by entering into leasing agreements. You don’t have to sacrifice on quality construction machinery just because you don’t have the necessary funds. As long as your business plan is sound, you will be able to get funding from leasing companies to buy any top-notch construction equipment your business needs.
If you are concerned with the cost involved in purchasing brand new industrial equipment, then a better option for you would be to acquire refurbished machinery. And a good way to do so will be by participating in auctions.
The biggest benefit of buying from auctions is that you get a chance of acquiring machinery at very low prices. For one, the equipment will already be quoted at a lower price since they are refurbished. Secondly, since it is an auction, you have a chance of getting the equipment at even lower prices if there are not many active bidders for the machinery. As such, participating in auction s is the best possible way for any business to obtain industrial equipment without breaking the bank.
If you go to a dealer to buy brand new machinery, you will likely be limited to a few choices. However, auctions will have a large variety of machinery on sale. Every type of brand and model will be on sale. This gives you a much better opportunity to find the perfect equipment for your workplace. For example, an equipment you need may only be available in a specific size which might be too big for your business. However, auctions may have a few imported models that are smaller than the typical size.
Auctions typically will feature equipment that has a detailed report about its maintenance. The records will provide a very in-depth view of all kinds the faults the machine had and the repair jobs that have been done on it. This ensures that you know the exact condition of the equipment you are buying, allowing for a more accurate pricing. If you had chosen to buy refurbished equipment from other sources, you may not have access to any kind of maintenance record. And this would have increased the chances of you ending up with a substandard equipment at a much higher cost.
When people hear the word ‘auction’, they typically picture having to bid physically the place of the event. This is not true at all. Several reputed auctions offer live online bidding auctions to interested parties. You can literally sit at home, participate in an auction, bid on equipment, and win it. Just contact the auction managers and they should be able to arrange an online bidding option for you in case they offer the facility. However, do keep in mind that you may have to pay a fee to participate in online bidding.
A risk of buying second-hand equipment is that it may not have a clear title. If you disregard it and buy the machinery anyway, you risk being entangled in legal cases and losing out the equipment. Auctions typically don’t have such problems. The organizers usually mandate that all machinery on sale have clear titles. This essentially guarantees that the money you invest in acquiring the equipment is protected and you don’t lose ownership of it in the future.
To fund the purchase of industrial equipment, every business owner will be faced by two options – either use his own capital or get it financed by third parties. While funding the acquisition of equipment will give the owner complete ownership of the machinery, leasing allows a business to acquire the equipment while only paying a monthly lease amount rather than paying for it in full. Let’s take a look at some of the industrial equipment financing options that might work well for your business.
This type of lease is also known as a Fair Market Value (FMV) lease or a true lease. The term period of the lease is usually limited to 75% of the equipment’s expected life. The monthly payments are usually less than what you would have had to pay for a bank loan. At the end of the lease period, you can either return the equipment or buy it at a ‘fair value’ as determined by mutual agreement. Since monthly payments are considered as rental payments under the IRS code, they are 100% tax deductible. The lessor also has the full right to depreciate the equipment. If you are unsure about whether you wish to own the equipment after the lease period, then this is your best option for acquiring industrial equipment. This could give you a rate as low as 1-2% for 60 months.
In this lease option, you can buy the machinery at the end of the lease period as established by the mandatory purchase price. The price is usually expressed in terms of percentage. For example, 10% Put or something similar. PUT option leases help in lowering the lease payments within the term period of the lease while also avoiding any kind of potential risk for both parties at the end of the lease period.
Such types of lease contracts are usually used for vehicles like trailers, trucks, and so on. As per the IRS code, you can maintain full deductibility of a true lease while negotiating the residual value of the equipment in advance. This is usually less expensive than other types of leases and traditional financing. Lessor will have the right to depreciation. If your business involves large-scale use of trucks and such similar vehicles, you should definitely check out TRAC leases.
Also known as a $1 buyout lease, you are required to pay a fixed monthly payment for a specific period in order to acquire the equipment. You will have the option to buy the machinery at the end of the lease period for a nominal amount of $1. You can depreciate the equipment and record it as an asset. The lease payments will be reflected as liabilities in the balance sheet. This type of lease may not qualify for deductions as per IRS regulations. As such, if you are looking forward to IRS deductions as a way to save on equipment, then this type of lease is not at all suitable for you. However, in case you wish to obtain the equipment at the end of the lease period for ‘free’, then a capital lease would suit your business very well.