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You Must Know These Before Applying For Manufacturing Finance Loans

You Must Know These Before Applying For Manufacturing Finance Loans
Either you’ve recently started your own manufacturing business.
Or you’ve finally decided that now is the best time to grow your business. Now the only thing that's standing in your way is finance.

Wanting to expand your business means getting more machinery and equipment. That can be rather pricey. This is because your business's cash flow is unable to get through all these expenses. You have to pay rent, suppliers and other debts the company is paying off.

Yet that shouldn't be something that's going to stop you from fulfilling your business’ goals. 

Finding the perfect funding solution can be difficult and stressful. But it doesn't have to be. Here are a few finance solutions that can help you.

Research and do the maths

Before you plan on looking and applying for manufacturing finance for your business, it's important to make sure you have planned everything. You need to research manufacturing plants and equipment financing first.

Find out how this new loan will affect your business’ finances. You don't want to find yourself in debt which you can't come out of. You’re trying to expand your business right? Make sure this loan should benefit your business in the long-term.

Most financial services institutions offer a business finance calculator. This will help give you an idea of how much you’ll be paying. Do this before you get the loan because it’s always best to prepare yourself.

Are you planning on buying or leasing the equipment?

You have an option to either buy manufacturing equipment or lease it. There are a few things you need to consider as both these options have their pros and cons. 

The advantage of buying the equipment is ownership. You know that once you've finished your monthly payments it belongs to you. You will be using the equipment for a few years and it will be profitable once it has been paid off. This is an advantage only if you will still be using the equipment in a few years. 

It will be your responsibility to maintain and insure your assets, but that can be paid from your business’ taxable income.

Remember that when you take out finance for a specific asset for your business, the value increases despite the fact that the asset doesn't belong to you yet. The asset you financed becomes part of your fixed assets from the day your manufacturing finance has been approved. 

The impact on your cash-flow will be spread out over a couple of years. That being said you won't have to pay it forever. Once the last installment is paid, the asset is yours.

Yet, the disadvantage of purchasing equipment is technology. In today’s day and age, technology is always changing. You need to be sure that what you are buying will be useful for a long time. If you know that the machinery you’re looking for might change in the next three years, the best option would be for you to lease it.

It would be a loss for your business if you buy machinery that would be outdated after two or three years. Make sure you always keep that in mind.

Leasing equipment has one main benefit. If a better option comes along, you can always upgrade. When you lease equipment, it doesn't belong to you so you can return it after a certain period of time. It also doesn't become a liability to you, for example, when there is a new upgrade in the market. 

But the one problem that comes with leasing is the expense. You pay more than the amount that you would’ve paid if you were buying it. 

Despite the fact that it is expensive to lease, the bright side is you won't need to do maintenance or servicing during the time you’ve leased the product.

Tip: When deciding whether you’re buying or leasing, it is important for you to know how long you’re planning on using the machinery for. Research how often the machinery technology has been upgraded. This will give you a better understanding of whether you should buy or lease it.

Know what type of loan you’re getting and how it can assist your finance needs

It's important to know the type of financing you’re getting. This will help you in the long run. In many cases when you apply for a loan you might not understand the jargon. That's why it is best to research and ask questions beforehand. 

Manufacturing finance offers you money to purchase equipment for manufacturing. This could include manufacturing for extrusion, blow moulding, injection moulding machinery, milling machines and metal presses. 

If you have a small business or you’re starting up, this financing can help make things easier for you. It allows you to get the latest equipment without having to pay a large amount at once. This helps you build up your business. 
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