Manufacturing Equipment Financing
When you put the scope of a manufacturing process into perspective, you quickly realize the immense complexity involved. All types of machinery — everything from blades to conveyors and microchips to robotic arms — are necessary for building a product.
Now, examine that from a financial perspective and you have a process that costs a good deal of money to build. Factor in run-rate, materials and labor, and you’re suddenly running an expensive operation.
That’s why it’s important to work with a lender with an extensive history of assisting clients across the United States to secure financing for manufacturing equipment. At Funding Well Capital, we pride ourselves on having a team with a wide variety of experiences and are able to design a unique plan that works for you.
Obsolescence — A frustrating aspect of purchasing manufacturing is how quickly technology becomes obsolete. Advancements in machinery can make yours outdated, and falling behind can lose you time, product quality and money. Plus as your product ages, reselling your equipment becomes a less attractive option for the banks.
Depreciation — Wear and tear from your machinery can make it very difficult to sell it back at a good price. You aren’t purchasing equipment for it to sit on a shelf. Deterioration of products is a mainstay in the manufacturing industry. Over time, owning this equipment means you’ll eventually have to replace it. When that time comes, recouping its worth becomes impossible, leaving you to eat costs that could be avoided by financing.
Capital Outlays — Large amounts of money are needed to purchase manufacturing at the outset of your operation. And over time, you’ll have to add more machinery if you want to grow. Financing can help you with initial costs in obtaining the necessary equipment you need to operate.
Common Types of Leases
Operational Lease — In an operating lease, a fixed payment is made over the course of several years. At the end of the contract, the equipment can be returned or also sold back to the lessee at the end of the term. Or the lessee can continue to make payments, in most cases this can lead to owning the equipment outright. The benefits of these leases are that they typically have the lowest monthly payments, similar to leasing a car versus buying it.
An operating lease is an off balance sheet lease, so the equipment would not be placed on your balance sheet. They are also considered in many cases to be an operating expense, which means the payment can be 100% tax deductible.
FMV Lease — One of the most common types of leases, an FMV lease, is a flexible one. It is perfect for companies who are undecided on whether they want to own the equipment they want at the end of the lease. An FMV usually allows for the lowest monthly payment, as the terms would set the buyback amount as higher than, say, a dollar or 10% buyout lease. FMV leases also afford businesses the opportunity to use the monthly lease as part of an operating expense deduction, therefore providing you with tax incentives.
Funding Well Capital offers fast approvals with low rates at the federal minimum, accepting credits of all kinds. We look forward to working with you the next time you’re trying to secure funding.