Financing a cnc mill.
This looks like the best forum to speak of this.
I'm doing side work producing parts for a certain few models of cars. Things are getting busier and I keep adding to the offerings. This is in my home shop, in what was my free time. My 40hr work may also have issues in a few years so this is a semi backup plans also. It's gotten to the point where a cnc mill and lathe look like the thing to do. I'm planning the savings for a huge chunk of the purchase, but would like to get financing also to boost the timeline.
I've been programming and running a puma12 and small okuma mill at work for about 6 months. Not setting the world afire, but I have a decent handle on getting going so cnc isn't all new.
My credit union is the only place I've inquired about the particulars so far, and came out with 7-7.5% rate. Nothing written, just discussion at this point. Being in a home shop am I looking at it wrong in that a couple hundred a month out for a 12k to 18k machine will be safer than stepping in deep for a more reliable and expensive option?
Are there better options on where to check on the financing?
Thanks for any help you all offer. Loren.
Can you lease a machine with the option to buy? I've not done it but a associate of mine told me that he could lease a machine with the option to buy at no interest. Product was Southwest Industries.
Credit unions seem to normally have higher interest rates according to the window sign, at least around here, but I don't use them.
Used certainly looks more tempting than new these days, not many good deals on new
Either way, I always say to arrange for minimum monthly payment with the option to put money down with no penalty whenever you have the extra cash, but I don't know what's really available in the US.
A credit line can work well if the interests are low enough and you can just make minimum payment but banks seem to be changing rates on those whenever they feel like it now to boost their profits and screw their customers.
Sometimes you can also add it to the home mortgage assuming you have enough of the house paid off, gotta be careful there as well but some set ups are great for it. Unfortunately what I use isn't available in the US as far as I could find.
Have you tried asking the manufacturer? Not knowing any better I would assume in this economy they'd do everything they could to help you buy a machine...
I don't know..... 7-7.5% isn't real bad. Get the bank to give you a break-down of it and then get the manufacturer to give you a break down especially what the price would be after the lease term is up. Then compare the remaining principal for a loan to the buy out price of the lease after the lease term is up. If it is anything like auto dealers, leasing is the method in which YOU GET SCREWED THE MOST. I really don't know what machinery dealers or manufacturers plans are, but if you lease a car or truck, you must be mentally handicapped.... yes, it is that much worse than borrowing from a bank. and for those of you that have, or are, tough SH!+.... face it.
The next thing is, although the more you put down, the less you pay to a bank, don't put all your $$ down. You need to leave $$ for tooling and then to have a bit of cushion to be safe on the credit end of things. just in case you hit a slump.
That is just my thought's. I think I'm gonna start a new thread.... "jimmy joe bob's rants" ... yeah. I want to express my view on things and how we are all making mistakes by letting in the middle man.
but back to your need. Financing is there if you need it. Small banks are the way to go. A few years back I looked into borrowing 25k for a 35k machine. It was on ebay, so I followed a link for financing that was offered. Got a quote and it was from a company that is suppose to specialize in machinery financing. I calculated it out to 20-21% interest. they tried to claim otherwise. Asked a local bank that is growing out of it's shoes.... first said 10%, then said they couldn't finance cause I was only 2.5 year old business. Then went to a smaller local bank and got 6.5%, no questions, also added on rigging, no questions....... hmm, that was easy and so much better than the first inquiry. first inquiry for the supposed specialize in machinery financing was gonna be like $850 per month, I pay $520 for more $$ borrowed.
Just my 3.5 cents. but think about hearing it
I've heard that Hass is very good at financing. Might be worth a call. Back in the late '90's I knew a guy that had a new Hass lathe and mill that was financed thru them, in a shed behind a trailer house. Last week I heard that that same guy has built his company up to a major manufacturing shop down in Gatesville.
Go for it.
Haas has a little bomb in the machine......payment late? Machine stops till you catch up!!!!
Originally Posted by i_r_machinist
I also support the idea of using your local community bank! Don't bother going to the Bank of Assholes!
My local bank loaned me almost all of the money that I needed to purchase the cnc lathe that I found (used) and it was at 6% on a 3 year note. I can pay extra as I can with no penalty.
I can walk into the bank and talk with the VP on a first name basis II had never met him before, although I had been a customer for a few years.
Keep it local and in the community.
Lee (the saw guy)
I finaced a new ST-10 with Haas they are very good to deal with. They really try to help you out as much as they can which is more than I can say for some of the local banks/credit unions. But then again Haas knows the manufacturing world and whats going on in it and the local loan officers at the local bank may look at you as more of a risk. I actually agree with Haas on the software lock on the machine if you don't pay. If your machine is running then you should be paying your bill.
Jason, don't you have to have a million dollar insurance policy in place to be approved by Haas, or am I misinformed?
Originally Posted by alliancefab
I'm sure it would have to be insured like any loan, but I don't see why it would have to be for more than the machines replacement value, they'd never give more than that value anyway, if that.
I'm pretty sure a new machine is not in my near future. Even if payments could get low enough I wouldn't want that burden on my back.
How much you talkin? $10-20-30K? Big whoop. Get it done form the local bank or credit union. If they are nice and small they will work with you, even if they don't know metal working. I look at it this way. There are tons of people out there financing shiny new pickups that cost $40K plus. And all those things do is burn tons of gas and depreciate the moment they leave the lot. At least a good used machine tool makes you cash and holds it's value(some what).
Yeah, like I said at first, thinking 12-18K$. Hoping that can get me a machine that will get some work done for me before I need to sink tons of repairs into it. I need the payments to be low enough I can pay for it and put some crash/repairs funds away at the same time.
My 2 cents, 7% or so is pretty close to free on a machine. Especially if you are only looking at 15k. You're not going to carry this loan for 30 years, 3 or 4 at the most. Total interest, if you have the work, is going to be a week or 2 of work. If you never pay down the principal, total interest over 3 years is $3150, you can make that picking up cans on the side of the road, I've made close to 3 grand in scrap off a machine I paid $1800 for in a month, never mind how much the parts were.
I can make money now, or I can diddle screw around trying to save $20 a month.
If its 10% or 12%, if you have the work, and can't do it now, put the damn machine on the floor and make some money.
Edit: I know some here believe in paying cash for everything and never ever being in debt, theoretically its a great idea, unless you have the work, or can't do the work and don't have the money. I don't like debt, and when you go in to debt, do it responsibly and for a damn good reason. Starting out, there is no reason to drop 300k of machines on your floor.
Also, I bought 3 machines on credit cards, and they weren't 7%. 1 sat in storage for over a year and then paid for itself in a few weeks, 1 was never used and sold for a wash, 1 sat in my driveway on a trailer for 5 months and then paid for itself in about 3 days.
My personal rule is 3 months, if I pay 100k for a machine it will return me 33,333 and 33 and 1/3 cents per month. If I pay 3k for a machine I'll get at least $1k off it in a month. I'm not saying all that money goes towards paying for the machine, but that's what I want to see. Then again I've never run "high numbers", I've almost never thought about buying a 100k machine, and I don't take business too seriously. Making parts is pretty much just a way to pay for having a lot of cool machines that I get to play with, AKA.. the biggest and best toy box ever!!
Consider how you decide buying a car.
...Your ability to make the payment decides what car you buy. So...what car can you afford a Datsun, Chevy, or Cadillac?
Buy your machine based on what car payments you can afford and drive that old car for a few more years
Now we've figured out my(our, I've got a business partner with the same problems) problem, I'm running on a Datsun budget. And I only expect Datsun performance. Things like it handles well, gets good mileage, easy to fix, fun to drive, and cheap.
Originally Posted by scadvice
If it's not good enough we add a little GM to it.
If that's not good enough, we add a bit more Chevy to it.
As for the Cadillacs, I've got one sitting out back with tires that are so dry rotted they exploded.
Keep it sane, that first step is always big, $15k into the unknown is a big step, $15k or $1500k into the known, may not
be a big deal, betting on what you are putting on your table, worse if you have a family, that's a big scary step, stress
You know, I learned the lesson about quibbling over shiny money on my first lathe purchase. had forgotten about it till you mentioned it. Spent literally have a year looking for "a deal", wasted 6 months of not getting something done. I could have bought the lathe for 500$ more than the 1200 limit I had imposed and made more than that back in the meantime. Dang it, back to kicking myself for that!
Originally Posted by Bobw
If I try to hold to the 3 month rule you speak of I'll seriously have to rethink my plan here. I really don't think I have enough knocks on the door for that.
Don't worry...... you wouldn't be alone. I paid over $20K for my mid 90's Mazak QT-15 lathe, had it for almost a year now and haven't done much more than $2000 worth of work on it so far. I quote work every day......... but rarely anything comes in the door that I can put in that machine to make money. I still think it will eventually turn into a good investment, but it hasn't proved to be the case yet.
Originally Posted by DMSentra
Some investments take longer to pay off, and some never do for are necessary to have(like cmm's eh?). Smaller the investment, easier it is to do obviously.
My VMC hasn't nearly paid for itself yet in terms of time it ran, but it has allowed me to take on quite a few jobs since I have it, that were perhaps 80% lathe work, but had that weird little mill thing that had to be CNC milled. Without it I couldn't get that lathe work, so it all contributes. And it's also been easier on the body for many jobs vs manual. Hence one reason I'd like a turning center now, left shoulder is messed up, strong anti-inflammatory pills almost each night hoping I can work the next day and wondering when I'll be on my ass for a week again.
At the same time it really takes the work to justify it. I can put a 100K machine in here for only $290/month and nobody rushing me for the principal on it, except since I hate debt I bust my ass to pay it off asap. Type of thing I'd want done in 1-2yr top. So I remain very hesitant to put any more $ into this just to make someone's parts cheaper and having to do even more work. Still waiting for that right job to really justify it, but damn it would be nice to let that shoulder heal for a while as all the work I've got now is on the bigger lathe that kills it. Been hoping for a good deal used but they're too rare in my area so new is pretty much the only option, but few have any decent prices anymore.
Now back to work.