Have you been losing sleep strategizing how to handle financing new machinery for your business? Whether you need a new copier or new stud welding equipment, you might be overthinking your problem.
Owning or leasing the right tackle can blow your capacity for innovation wide open and rejuvenate your bottom line by dramatically improving your production processes and optimizing productivity. Instead of simply weathering an economic downturn with quick-but-expensive fixes, you could position yourself to stride toward the forefront of your industry. Your mileage will depend massively on how diligently you analyze each purchase’s inherent pros and cons and adhere to a sound investment plan developed founded on both your short- and long-term goals.
Financing your next machine purchase could prove to be a quicker, easier process than you may now expect, as long as you proceed through each step with a mindfully fleshed-out strategy in place. More than anything else, getting your money’s worth in the long run could come down to working alongside an institution with a background that allows them to grasp your specific business and equipment needs.
A lender who lacks significant experience providing funds to manufacturers may not be quick to extend a generous sum to a borrower competing in an industry they simply don’t understand. Even massive financial entities with seemingly bottomless assets have declined loan applications from giant companies based on otherwise easily explicable misinterpretations or misconceptions of certain risk factors.
That doesn’t mean all hope is lost. You can still take your company’s financial future into your own hands by leaving no stone unturned in your own prep work prior to shopping for an equipment loan, lease or rental.
Think Safe and Green
Liability concerns can and will break otherwise sound deals to smithereens. Keeping your work environment as healthy and safe as possible is a linchpin factor in running the most productive shop you can. As an owner or manager, your responsibility for the well-being of your workers extends beyond purchasing the safest, most reliable equipment available to ensure that every employee is prepared to follow safety protocols to the letter every single day. Meanwhile, if you conscientiously outfit your shop with the most ergonomically designed hardware possible, your choice of equipment will reflect your commitment to minimizing your employees’ risks of discomfort and injury while maximizing your output. Make ISO 6385 and CSA Z412 design standards for equipment safety your holy texts.
Lenders may also look dramatically more kindly upon a business obsessively committed to energy efficiency when deliberating whether or not to extend financing. First off, a green mindset often leads to major cost savings. Second, and of equal importance, it’s a great shine on lenders when they demonstrate a willingness to invest in companies that take environmental stewardship seriously. Before you apply for financing, be ready to show off extensive research outlining your new equipment’s likely environmental impact and detail your plan to dispose of your existing machinery without creating an ecological hazard.
Weighing Your Financing Options
Not all options for financing new machinery are created equal. While not all will meaningfully reduce the cost of upgrading your equipment, each could be utilized effectively to outfit your operation more affordably. For the sake of argument, let’s think of the former as referring mostly to an item’s actual procurement price and the latter as an indication of your ability to obtain it right now:
machinery instead of purchasing it outright can sometimes control costs when your shop requires kinds of equipment that go through rapid cycles of obsolescence or will only be needed for specific projects. Since rented tools are not considered a fixed assets, you incur only a minimal cost when quickly returning or exchanging them.
equipment when appropriate to your needs may offer advantageously lower payments compared to purchasing some items. Be aware that you will likely not have the opportunity to purchase a leased item until your contract ends. Until then, you obviously will not actually own your newly acquired machinery. Consequently, the price paid at the end of the contract could be a bit of a trade-off: your final price may be lower than the potential cost of purchasing the same assets straightaway, but you end up paying that ultimately reduced amount after already paying numerous lease installments. Depending on your lease’s structure, those payments may fall under the umbrella of your operating costs, but you may end up shelling out more in the long run.
machinery in one fell swoop allows you to instantly own new equipment for a one-time price. Afterward, your company will amortize the cost over the asset’s lifespan. Some financial service providers will even extend loans for more than the estimated purchase price in order to cover potential costs of transportation, installation and employee training. Though preferable in many ways to renting or leasing tackle on a temporary basis, this may not be a feasible option for companies either lacking the out-of-pocket resources or qualification for financing to simply gaining equipment at a singular, uncomplicated price.
No matter how you plan on financing your new equipment, don’t sign off on the first offer you find. Embrace the internet’s fantastic range of specialized equipment retailers. Scope out industry-specific newsletters. Spend some hands-on time with gear exhibited at your next trade show. Trade associations can also provide a wealth of in-depth information valuable in reaching an informed decision based on much more than a supplier’s attractive price. In the end, factors such as a supplier’s reputation, a manufacturer’s standards for post-sales service and whether either party tends to reward loyal customers with stronger warranties or lengthier customer service plans are every bit as critical to any value proposition as dollars and cents alone.
Innovation Counts, but Be Realistic
Why do you want to finance new machinery in the first place? Do you want to boost productivity? Are you looking for a leg-up on your market rivals? Could you possibly run a more successful business without upgrading? Screw the in-your-face marketing campaigns telling you explicitly what you want or need, and think deeply on these questions. At a certain point, your company will have no choice except to either innovate or resign to becoming outmoded, but never acquire advanced technology or equipment just for the sake of owning the latest hardware. Your upgrades should streamline your everyday operations, build higher-quality goods and provide more efficient services. If they can bolster your research and development initiatives or revolutionize customer service, even better. Whatever the case, your customers need to know your business is marching forward with eyes fixed on how it can better serve them years down the road.
Be Prepared to Train
Any plan to finance new machinery should include consideration for the money, time and other resources needed to adequately train employees on upgraded equipment. Without a strategy built around a finite timeline, your company’s productivity could actually plummet if staff cannot adapt to revised processes or improved technology in short order. Always anticipate a learning curve if your newly acquired technology includes unfamiliar new features, and account for funds to address expected downtime while acclimating staff. Spending a little bit more right now may guarantee your operations maintain their capacity during a transitional phase.
Examine Your Needs and Means as a Whole
When financing new machinery, there is no room for any decision except one made after taking the totality of your company’s present circumstances and driving growth goals under meticulous consideration. Reviewing your operational processes alongside a third-party consultant may yield a completely fleshed-out understanding of how your business functions and help you avoid short-term transactions that ultimately cost you unnecessary money without worthwhile results.
With that kind of well-rounded plan in place, your equipment purchase stands a better chance of limiting waste by helping one area of your company at a time run more smoothly with improved turnaround times and overall efficiency. Placing your practices under a microscope may even reveal that you never needed new equipment in the first place. Congratulations, you can now save or reinvest the money you otherwise would have sunk unto unnecessary permanent assets.
Wait, there’s more. Unless you plan on running every single machine yourself at all times, you owe it to your staff to deliberate whether you can afford to shift some employees to responsibilities elsewhere in your operation if updated equipment renders certain jobs redundant. Alternately, could your shiny new technology end up tacking on costs for retraining or severance pay? Are workers protected from reassignment by existing collective labor agreements?
Also keep in mind, “new” is not always practically synonymous with “better.” You might be able to finance new machinery without having to dispose of the gear your new acquisitions replace. When picking up a cache of highly advanced computers, your less-powerful models might still offer superior performance over rigs in other departments.
Along similar lines, it isn’t at all unusual for businesses to forego freshly released software in favor of waiting for the second or third version after initial adopters have discovered the most aggravating bugs and developers have pushed a series of timely patches. In some instances, all those technologically groundbreaking features may not ultimately be of the greatest use to you at all.