CNC Machine Financing and Leasing

While there are some banks that will do CNC Machine Loans it is often better to get a loan from a company that does financing for New and used CNC machines, or that offers new CNC equipment financing specifically. Neal Business Funding has the expertise required to offer you fair rates and to understand your business, where a mainstream high street lender might not.

There are many companies offering financing for New CNC Machines. Neal Business Funding knows the market well and is willing to consider offering a loan for CNC machines of up to 100% of the fair market value of a used machine, with repayment terms of 1 year to 6 years, depending on how old the machine is.

If you have been doing CNC leasing for a long time, and know that your business is stable, applying for CNC equipment financing could be the next logical step. Upgrading a very old machine to a newer but pre-owned machine via financing could help you to grow your business while saving you from the depreciation that comes with buying brand-new machines.

CNC Router Financing can cover, lathe/turning centers, mills, routers, lasers, water jets, and other machines. Milling machine financing may seem like borrowing a massive amount of money. However, an investment of $500,000 in a machine could save you tens of thousands, or more, in the long term and will also improve your business efficiency, enabling you to take on a greater variety of jobs and to take on a greater volume of jobs as well, increasing your earnings dramatically. There are other benefits to purchasing used CNC equipment on finance too.

Two common options for companies who are looking to get new CNC machines are borrowing money, or financing, or leasing a machine. CNC leasing is a good option for companies that are risk-averse. When you lease a machine, you are not taking on a significant amount of debt.  There are different types of leasing that you may want to explore depending on if you plan on only keeping the machine during the term of the lease and then getting the newest machine on the market when the lease is done or if you plan on keeping the machine for years to come.  One is called an capital lease ($1 buyout) and one is called a fair market value lease.  Your Neal Funding loan officer can get you the most cost effective lease possible on your equipment.

Leasing can be appealing because if you find that there is a lull in your business, or that you are not getting as much use out of the machine as you initially expected, you can just send it back. There is less of a commitment, and you enjoy flexibility and freedom.

However, leasing a machine means that there is no long term return on the payment depending on which lease you pick.  CNC leasing is good for short or medium-term use of a machine, but CNC machine loans offer something back at the end. When the loan is paid off, the machine is yours. CNC machines can last for many years, and for an established business that is going to be using CNC machines for a long time, equipment financing will pay off in the end.   Financing means eventually, the machine is yours.

One thing that many companies are failing to take advantage of is Section 179. These tax regulations present the opportunity for some significant tax relief for those who purchase used CNC equipment.

Companies have the option of deducting up to $1,000,000 of the total value of any used CNC machinery purchases as long as the machine is bought and put into use before Dec 31 of each year. For bigger purchases, the allowable deduction is phased out $1 for $1 above the $2,500,000 equipment-purchase threshold.

Buyers can take advantage of 100% bonus depreciation is on qualified used CNC equipment put into service on or before Dec 31 of each year.

Let’s face it, business finance is full of jargon. If you operate a machine shop you likely have a lot of skills in milling, cutting, and working with metal. Your focus is not on banking. So, understanding the distinctions between leasing, hire purchase and asset refinancing is not something that you have sent a lot of time thinking about.

Asset finance is the broad category that all of the above options for CNC machine financing fall into. When you are looking at high-value capital purchases – and CNC machines fall into that category – you want to find the best rate for the purchase, and the lender wants to be confident, for their part, that they will get their money back.

Asset financing has two sides. Firstly, you’re looking for CNC machine financing in order to get equipment for your business. You need that CNC machine so that you can take on more jobs and you might lease, lease-to-buy, or get a loan, to acquire that machine. The other side of the business is that you already have some assets, and you might use asset refinancing to get working capital to cover the costs of a future loan.

Equipment leasing is a form of CNC machine financing where you pay a monthly fee for your equipment. Some leasing is short-term, and you hand the equipment back at the end of it. This is good for a small project or a low-risk pilot. Some leases allow you to buy the piece at the end of the project, although this is not seen as often with such high-value items as it is in the consumer market, where “rent to buy” is common for household appliances.

Equipment Financing Experts

Leasing Advantages

Leasing has some accounting considerations that loans and buying outright do not. When you lease something, the cost of the equipment is an operating cost, so it will be written off against gross profit. With owned equipment there is the option to write the equipment onto your balance sheet as an asset instead.

Long term leasing can leave you spending thousands more than the cost of the original purchase. Hire purchase is still more expensive than buying outright up-front, or on a loan, but is a good option for companies that struggle to access CNC financing outright. Financing, on the other hand, tends to have a lower interest rate which makes it appealing if you are in a position to borrow that amount of money. Buying a used piece of equipment is often a safer bet because used equipment does not depreciate as quickly as new equipment. CNC equipment loses a lot of value once it has left the factory and been used for its first job, so recouping the costs of a new purchase can be difficult even after a few months of ownership.

Remember that if you have a loan secured on a piece of equipment, you cannot take out a second loan on that equipment because the original lender has a claim to it. This means that your options for asset refinancing will be limited. Think carefully before you tie up a huge amount of money in loan repayments, and make sure that the machine will pay for itself in terms of the type of work, and order volume, that it will allow you to take on. Don’t be shy about talking to a financial advisor, and shopping around to get the best deal.