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Page written by Chris Godfrey. Last reviewed on December 4, 2024. Next review due October 1, 2026.
Computer Numerical Control (CNC) machining is the bedrock of US manufacturing. Controlling everything from industrial lathes and drills to grinders, mills and more, CNC technology can make light work of very complex tasks. However, CNC machinery does not come cheap, and paying for it out of cash flow can be prohibitive. Fortunately, CNC machine finance is here to take the load. Read on to learn more about this form of business funding, how to get it, and what the benefits are.
CNC machine finance is a form of equipment finance. Businesses use it to buy or lease the big-ticket CNC machinery and equipment they need. This supports their cash flow by spreading the cost over time instead of paying 100% of the purchase price upfront.
CNC machine finance falls into two classes – business loans to buy the equipment, and leases that are long-term equipment rental agreements:
Although many types of business loans are suitable for buying CNC equipment, they all work with the same basic format: You borrow a sum of cash and then repay it over time. Interest charges and fees are added to the principal amount you borrow, and the lender may retain a lien on the machinery during the term of the loan. At contract end, you’ve paid off the loan and you own the equipment outright.
Advantages of business loans to buy CNC machinery
Disadvantages of business loans to buy CNC machinery
Leasing works differently from business loans. With a lease, you’re not buying the equipment, you’re entering into a long-term rental agreement. Depending on the type of lease you choose, (finance lease or operating lease), you may have the option to buy the CNC machinery at contract end for a pre-agreed sum, (which could be as low as $1 but is typically the residual value of the machine – which means what it’s worth in used condition).
Because you’re not repaying the whole cost of the equipment, leasing usually requires lower monthly payments than a business loan. You may also pay a smaller down payment – perhaps equal to one or two month’s repayment instalments.
If you choose not to buy the machinery at the end of the lease, (or you have chosen an operating lease that forbids it), the equipment goes back to the lender. You would then need to take out a new lease and obtain new CNC machinery. (Which could allow you to obtain more modern and up to date equipment).
Some lessors (lenders) may give you the option to extend the lease if you prefer to keep the machinery but do not wish to pay the residual.
Advantages of leasing CNC machinery
Disadvantages of leasing CNC machinery
CNC machine financing can be used to buy or lease almost any type of equipment that uses computer controlled technology to manage its operation. This includes:
Yes, although some lenders may place restrictions on the types of used CNC machinery you can finance and may also set a limit on the number of operating hours the machine has worked.
Terms and conditions for CNC financing are often complex and will vary from one lender to another. Sometimes, the differences between offers could add up to thousands of dollars over the life of the loan. It therefore makes sense to shop around before settling on a deal. You can do this by approaching banks, credit unions and online lenders one by one, or you can use the services of a loan marketplace that will immediately introduce you to a choice of CNC finance deals from a range of lenders. Some marketplace platforms can also give you advice and help you with the application process. This can be especially useful for borrowers who have never taken out a CNC machine loan before.
Although every lender will have their own qualifying requirements, you’ll usually need the following to obtain a CNC machine loan:
Depending on the type of loan you choose, you may also need to provide collateral with a value that is at least equal to the amount you wish to borrow. Collateral can be real estate, land, or other major assets. Lenders typically ask for this type of security when businesses have weak trading results or when the business owner or principal has poor personal credit.
No matter if you’re seeking your first business loan or you’re a seasoned borrower, working with business finance experts can make all the difference when applying for funding. Contact Swoop to discuss your borrowing needs, get help with your application and to compare high-quality CNC machine financing from a choice of lenders. Give your manufacturing business the boost it deserves. Register with Swoop today.
Written by
Chris is a freelance copywriter and content creator. He has been active in the marketing, advertising, and publishing industries for more than twenty-five years. Writing for Wells Fargo Bank, Visa, Experian, Ebay, Flywire, insurers and pension funds, his words have appeared online and in print to inform, entertain and explain the complex world of US consumer and business finance.
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