Wednesday, December 19, 2018

4 Smart Tips for Financing Machining Equipment

by johnkelvin318 (writer), , February 27, 2018

Here are a few smart tips to keep in mind while going starting and going through the extensive lease application process:

Consider the scenario where you are starting a risky business which requires heavily on expensive specialized machinery, for example, a photochemical metal etched machining company. In such cases, the best way to build a specialized metal etching business starts by financing machining equipment through a qualified lender that’s core business model aligns with your financing goals. Starting a business that requires a substantial amount of up-front capital, requires smart planning, patient research and possibly seeking the advice through a metal machining business consultant, to ensure you purchase the proper brand of machining equipment and proper leasing company.

The commercial equipment financing process requires a lengthy application review. If you’ve found the right lender that specializes in working with machining companies, you’re more likely to get approved. Your approved loan, is an equipment leasing contract, that will provide you with the capital needed to get a new specialized machining company off the ground and rolling. Like traditional bank loans, you’ll make monthly payments over the course of a several years until the principal amount is paid back in full. After the contract is completed you’ll drastically lower your machining shop overhead.

As mentioned above, starting a metal machining shop isn’t possible without a considerable amount of cash on-hand. Like most entrepreneurs, up-front funding is needed and will required a leasing contract through a commercial lender. Here are a few smart tips to keep in mind while going starting and going through the extensive lease application process:

1. It is important to choose a suitable lender. For example, if you need to finance high-tech machining tools, then it’s essential your lender has prior industry experience understands the market and current industry machining trends. This will help ensure that the application process moves along at a steady pace.

2. Make sure to look for machines that have the highest resale value. The lender will want you to do so, because they’re figuring resale value into your loan approval equation. This reason is simple, if you default on the lease agreement, the lender will repo and quickly resell the used equipment in order to recover as much capital and reduce their loss. Like most industries, top brand-name machining equipment has higher resale value than the rest.

3. Properly show the lender why you need the leasing contract and how it will make a direct impact on your ROI. Every commercial leasing company has to be confident that it’s a wise decision for their business to provide cash backing, especially backing on pricing equipment. Try to oversell and ensure how smart their investment will be and why leasing a particular piece of machinery will play a vital role in your company’s rapid growth.

4. Apply for equipment financing when it financially makes sense. Your current financial status will determine whether you receive a loan and the amount you qualify for. Getting a lender to approve your lease application, particularly in the machining industry is difficult, this is because typical transaction amounts are significantly high. Work to increase your business credit by lowering or being completely debt free before applying. Lenders will likely pass on new business applicants that already have any personal debt or outstanding debt from a prior business that’s not been paid back in full.

If your lease application is approved, you will start receiving benefits that can help grow your business, like increased credit and various tax benefits. Always utilize an accountant with prior industry related experience. A savvy small business accountant will help you take advantage of all the yearly financial tax benefits machining shops receive.

    ·The fixed payment amount gets deducted every month, allowing your company to breathe freely and invest in other necessary assets.

    ·As long as you have entered in to the proper financing contract and your leased equipment is generating the ROI that’s expected, leasing additional equipment in the future becomes hassle free because you’ve become an established metal parts machining supplier. Once leasing agreements are paid back, terms end, and you’ll now own a valuable business asset. This is usually the time when metal machining companies start to generate substantial profits.

Proper commercial equipment financing allows continued business expansion and revenue growth. This will allow you and the executive team to focus on brand advertising and the benefits of manufacturing trade shows. Once you’ve streamlined operations, you can afford to hire a powerful sales team that can effectively launch new products and service offerings, allowing your business to stay innovative and on top of the latest industry technology!

About the Writer

johnkelvin318 is a writer for BrooWaha. For more information, visit the writer's website.
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