Additive manufacturing is often used synonymously with 3D printing in which the similarity is the process of layering various material components. The material added layer by layer can be a form of metal, plastic, concrete or at some point human tissue. The industrial additive manufacturing process typically uses a laser beam to fuse these powder or liquid materials together to create a 99.9 percent metallurgical bond at defined points as directed by computer.stl files. This process is faster, offers high levels of precision and reduces production costs. Since the initial investment in the equipment is more expensive than a standard machine tool, many manufacturers look to finance this capital expense rather than pay cash.
Automotive, aerospace, medical, dental, research, engineering and construction industries are embracing the flexibility of additive manufacturing equipment. Additive manufacturing is predicted to grow substantially as more companies develop production equipment, more materials become available, and the importance of mass production increases.
With equipment financing, more manufacturers can acquire the additive manufacturing equipment they need to be flexible, efficient and competitive, while also benefiting from the substantial materials savings and reduced energy costs of this technology. The benefits of financing capital equipment apply not only to additive manufacturing but to all kinds of industrial equipment including packaging, plastics, machine tools, construction, flexographic, food processing and finishing.
Equipment Financing Advantages
By financing equipment acquisitions, manufacturers preserve cash and credit lines for other uses. Here are some of the other benefits of financing capital expenditures for additive and other types of industrial equipment:
- Cash conservation - Leasing equipment allows manufacturers to preserve working capital and lines of credit for other business investments. Any progress payments required by the vendor may be made by the lender on behalf of the customer.
- Flexibility - Payments can be structured to match budget requirements, seasonal revenues and terms aligned with the equipment’s useful life.
- Obsolescence protection - Financing provides the ability to add or upgrade equipment and software during the term.
- 100 percent financing - By bundling acquired equipment with soft costs, such as installation, sales tax, freight and maintenance into one agreement, end users can acquire what they need with no money down and one fixed monthly payment. Compare this to a 75 percent loan-to-value term loan financing, and the advantage is clear.
- Customized financial solution – Equipment financing may provide tax advantages. A carefully structured financing plan can maximize equipment depreciation and tax credits while minimizing income tax liabilities.
- Increased efficiency in cash flow management – Fixed payments throughout the term make budgeting and forecasting more predictable.
Ask These 10 Questions
With a potential acquisition of any manufacturing equipment, it’s important to consider all available financing options. Here are ten questions to ask when making this decision.
Before
1. How am I planning to use this equipment in my business?
2. Does the finance representative understand my business and how this transaction helps me to do business?
3. What types of “soft costs” will I encounter, and can they be financed?
During
4. What is the total monthly lease payment and are there any other costs that I could incur before the financing period ends?
5. What happens if I want to change this financing agreement or end it early?
6. How am I responsible financially if the equipment is damaged or destroyed?
7. What are my other financial obligations for the equipment (such as insurance, taxes and maintenance) during the financing period?
8. Can I upgrade the technology or add equipment under this agreement?
After
9. What are my options at the end of the financing term?
10. Are there any extra costs at the end of the financing period?
With answers to these questions, additive manufacturers can utilize equipment financing to deepen their well of cash, because just like any other business, a strong cash position ensures flexibility.
Choosing a Finance Partner
As manufacturing processes evolve, additive manufacturing is expected to grow in relevance as the need for parts continues to rise and pressures to reduce time, costs and materials grow.
Selecting a finance partner to acquire equipment doesn’t need to be complicated. Seek out a financing partner that offers a consultative approach and can accommodate your business with customized payments to match budgetary requirements. Make sure the financing company understands the needs of your business, takes the time to ask and answer questions and listens to your responses.
With a well-established financing partner with a strong track record, a manufacturer can acquire the equipment needed to meet changing customer demands, and cost effectively manage their business to grow profitably.
Toni Larson is senior vice president of industrial equipment for Key Equipment Finance.
