What's new
What's new

Transition from low volume to production

Unrestricted bank loans?
Never seen them
The wonder of a 5 year lease is they are only thing they have is the machine.

Interest is cheap, even now.

Paying cash or paying off early may make you feel better, but it is bad business.
Cash is rare
Well, I don't know why our experiences are so different, but I've never had a loan with prepayment penalties. Mortgages and equipment.

And I completely disagree with the thought that shedding debt is anything but positive. Of course I'm assuming there's a shred of common sense and you're not going to pay a loan off and have $10.00 left in your account.

If you've got a couple years of operating capitol in the bank and paying a loan off will take 1/4 of that? Pay that shit off!
 
Well, I don't know why our experiences are so different, but I've never had a loan with prepayment penalties. Mortgages and equipment.

And I completely disagree with the thought that shedding debt is anything but positive. Of course I'm assuming there's a shred of common sense and you're not going to pay a loan off and have $10.00 left in your account.

If you've got a couple years of operating capitol in the bank and paying a loan off will take 1/4 of that? Pay that shit off!
I was referring to loans being free and clear, everyone I know ho has dealt with a bank wanted the house tied in. When I started out I could have bought any 30k car I wanted but could not borrow 10k to buy a machine unless I wanted to put the house up
 
I was referring to loans being free and clear, everyone I know ho has dealt with a bank wanted the house tied in. When I started out I could have bought any 30k car I wanted but could not borrow 10k to buy a machine unless I wanted to put the house up
Gotcha. My commercial building mortgage was with the same bank as my equipment loans, so they already had my building as collateral.

My house was used as collateral for the construction loan. Now we're back to the risk discussion. I was willing to risk everything, and my wife was on board.
 
There is a massive amount of time to be saved not doing all those tool changes whe there is a table full of parts, not to mention the time saved loading fixtures offline. Jay all the way there.
Nah, I was fishing to see if the process was portable and could be moved to another machine that's in his neighborhood and could be knocking this out at the same time as him.

I totally agree on the tool change thing but, it can create problems if you make 100 parts of Side A and don't realize something was wrong until they go back in for Side B and get the final dimensions. I prefer to know parts are hitting the numbers or if something is drifting, though it does cost some cycle time.
 
Nah, I was fishing to see if the process was portable and could be moved to another machine that's in his neighborhood and could be knocking this out at the same time as him.

I totally agree on the tool change thing but, it can create problems if you make 100 parts of Side A and don't realize something was wrong until they go back in for Side B and get the final dimensions. I prefer to know parts are hitting the numbers or if something is drifting, though it does cost some cycle time.
WIP is the work of the devil! Complete part(s) every cycle is the only way to go. Otherwise, what's the point of a sub spindle lathe?

I tried high density plates, but for our parts it was a miserable failure. In 70 parts, we could have a tool go from hero to zero and scrap most of the cycle. Whereas with an operator checking every part, trends are easy to spot.

 
Gotcha. My commercial building mortgage was with the same bank as my equipment loans, so they already had my building as collateral.

My house was used as collateral for the construction loan. Now we're back to the risk discussion. I was willing to risk everything, and my wife was on board.


That is the good thing about a lease, is that is the only thing on the hook if things git bad.


But as a rule, folks here, and likely everywhere (the subject is in songs and such) all want to borrow money from someone else, but think that it's greedy for "someone else" to ask for collateral other than said object.

I look at it as if YOU are not willing to back it up with your other stuff, than why would I want to take the risk on it for a few% interest? (10.5 is still only 2% that the banks gets to keep over prime)


--------------------

Think Snow Eh!
Ox
 
WIP is the work of the devil! Complete part(s) every cycle is the only way to go. Otherwise, what's the point of a sub spindle lathe?

I tried high density plates, but for our parts it was a miserable failure. In 70 parts, we could have a tool go from hero to zero and scrap most of the cycle. Whereas with an operator checking every part, trends are easy to spot.

I picked up a sub spindle y axis this year.
technically slower than my old process. But done in one barfed is the answer where it can be applied.
 
If ya have to borrow, ya gotta borrow...........no two ways around it................I left the bank out the equation for the last few machines.............I have borrowed in the past even when I could pay cash, but when interest was so low I figgered the cash is better off in my account then tied up in iron............but in '22 I dropped a new lathe on the floor without the banker...........'23 was a shop truck, new(ish) tractor for snow blowin' 'n unloadin'..........no way I'm payin out interest. Heck the house could have gotten paid off a few years ago, but when you're locked in under 3%...........ya use your $$$ elsewheres..................no big banks either..........one phone call to my local credit union and they'll dump $100k into my account and take care of the paperwork later when the purchase hits my floor..................purdy stress free.

I have a lot of iron on the floor for one guy and a few part timers..........but that leaves room to whip out the low number stuff......I still do the occasional onesy twoseys...............PITA but they need to be done...........some turn into high number orders. Just got a referral to a new customer needing proto's made. Ugh..........not enough hrs in the day. But it prolly will turn into 1000's...........just part of the game.

I currently make an entire assembly that was a prototype job yrs ago............now that customer orders $600k+ of parts annually...............sure glad I took the time to look at that guy's napkin sketches.................
 
We used Equipment Finance Agreements, which are technically different from both a loan and a lease. I think EFA's are great. The machine is the collateral (no house/car liability), you can pay it off early and reduce the interest total, and there's no prepayment penalty. At least for the ones we've had. They didn't publish the rate for ours, but if you run the math it was very low interest. We used Stearns and they were great to deal with.
 
I’m in the load up the machine with parts and do the short run stuff on another machine. Do you still own your Haas TM? You can add a tool changer to that after the fact. It still has its limits but it’s upgrading a piece of iron you already own and don’t have to rig.
 
Lease payments are lower per month and the additional profit could be saved to go toward the buy out.
Typical equipment financing that's called a "lease" is completely different from the normal, run of the mill lease such as a car.
It is technically a loan, structured as such, but somehow is different.
The payments are not in any way lower than if you were to take out a loan.
I don't know where the technical difference is, but the first two leases I did had a 1$ buyout in the contract, the other 10+ did not even say that anywhere.
Also, to date I have not once been asked for a collateral. Never!
Not even for the very very first one when all I had to offer is an unpaid condo, a pregnant wife and a 5 year old little girl.
Phone call in the morning, one page document filled out and faxed back by noon, verbal approval by 5 pm, written contract sent via Fed-Ex in 2 days for signature.

As far as early payoff or penalties, that is in the contract.
I've had a few where the total loan cost is calculated up front, and that amount was due no matter if you carried the loan to it's full term of paid it off on the 2nd month.
Then there were others were the total loan costs were calculated, but there was a discount on the remaining balance of interest for early payoff.
 
If I were in your shoes and had good cash flow I would just finance a hass possibly with one of their robot packages.

I've seen zero down no payments for 6 months emails. Their financing makes it a no brainer IMHO.

Get a vf2-4 and make it super easy for your wife to keepr goin 24/7. It all depends on the parts but if you can get 6-8hrs of cycle without touching it then you can pretty much keep it gong all the time. The key thing is to get the setup dialed so running/checking/making parts is super easy to do with minimal brain power.

No risk. No reward.
 
Some great advise, a little I don't agree with, but that is personal opinion. We financed the Brother we purchased, at 7% it sucked, but it would have taken years to save the money required to buy it outright with cash. It paid for itself in 5 years, and I am envious of guys like Broke who bought a whole shop in less time.

The biggest thing to keep in mind is that you have to find what works for you and what you are comfortable with. I couldn't handle the stress of having a ton of debt, even if I had a ton of cash flow.
Can you pad some leadtime on the production jobs so that you can squeeze in a few emergency jobs for your existing customers here and there?
Great advice, this is exactly what I started doing with a customer who has been increasing the qty of work I have been doing with them. The current job, start to finish, no issues, is a 4 week job. Based on the current job in the mill, I will likely start a week late. I have a few other misc things that need taken care of, and who knows what else will pop up. So I quoted 8 weeks instead of 4.

Is quoting 8 weeks the right thing, probably not for many of you. In this circumstance, and for this customer, it is OK.
 
Thanks for all the responses guys, especially in reference to making spindle time for the small jobs.

So far what I'm doing:

-Quoting bigger jobs a little on the low end in favor of the long term guaranteed money, and quoting lead times a little on the high end (for what I can do) to space out the jobs I've got.

-Still not planning on financing, not yet anyway without a bigger wad of cash (had some scares and I need that there first) and potentially not at all, more of a worldview thing even if it takes me longer to get where I want to be. I've still got a big F-U chip on my shoulder from everyone who said starting a machine shop was impossible without a loan and nice equipment. Already proved them wrong on that but it's a big motivator to make this work lol. Eccentricity right? In any case, even if my no-debt preference is a bad move, I'll be a guinea pig for later shops to compare notes to.

-Getting more detailed on the quoting. The advice to program out a part for the purpose of quoting is tough to swallow as some are pretty detailed but it makes a lot of sense.

-On subbing, I'm super slow on doing more of that. Lost a lot of money doing it so far which is mostly due to my not QCing every single part, or spelling out terms for delays and scraps- so far I think it makes the most sense to speed my shop up and improve my bread and butter instead of outsourcing those things. Referring everything I don't think I can do.
 
Last edited:
I’m in the load up the machine with parts and do the short run stuff on another machine. Do you still own your Haas TM? You can add a tool changer to that after the fact. It still has its limits but it’s upgrading a piece of iron you already own and don’t have to rig.
That's a good idea actually. I might have to. I'm waffling still between selling it and buying a lathe, selling it and buying a nicer mill, or keeping it and trying to upgrade it. It's a great training machine but I'm still a ways out from employees.
 
Thanks for all the responses guys, especially in reference to making spindle time for the small jobs.

So far what I'm doing:

-Quoting bigger jobs a little on the low end in favor of the long term guaranteed money, and quoting lead times a little on the high end (for what I can do) to space out the jobs I've got.

-Still not planning on financing, not yet anyway without a bigger wad of cash (had some scares and I need that there first) and potentially not at all, more of a worldview thing even if it takes me longer to get where I want to be. I've still got a big F-U chip on my shoulder from everyone who said starting a machine shop was impossible without a loan and nice equipment. Already proved them wrong on that but it's a big motivator to make this work lol. Eccentricity right? In any case, even if my no-debt preference is a bad move, I'll be a guinea pig for later shops to compare notes to.

-Getting more detailed on the quoting. The advice to program out a part for the purpose of quoting is tough to swallow as some are pretty detailed but it makes a lot of sense.

-On subbing, I'm super slow on doing more of that. Lost a lot of money doing it so far which is mostly due to my not QCing every single part, or spelling out terms for delays and scraps- so far I think it makes the most sense to speed my shop up and improve my bread and butter instead of outsourcing those things. Referring everything I don't think I can do.

Subbing out jobs can be a bitch to get going, trusting vendors lead times, etc.

I have a decent vendor list that took me about 4-5 years to really develop. Lost hope a few times, when potential vendors up talked themselves too much and seemed to risky. Most of the good shops are full of work and cant take on more.

No Debt is the way for me.....So Far. I have a theory that if I had to sell a brand new machine at auction a month after buying it, what could I get for it. I would then want to pay enough cash up front to be able to cover the note with an auction sale.

I dont consider that as "debt" due to the equity in the machine being able to cover the debt associated with it.

Once you can drop 100k on a 200k machine and still have money to operate on, things will get easier. Until then, SAVE $$$.

Good problems to have, and its a lot to learn. There will always be something new to learn and get used to. Invoices end up with another 0 added on, buildings get bigger, machines get nicer, etc. Just try not to become to overwhelmed with everything, Stress can cause so many unwanted problems.
 
No Debt is the way for me.....So Far. I have a theory that if I had to sell a brand new machine at auction a month after buying it, what could I get for it. I would then want to pay enough cash up front to be able to cover the note with an auction sale.
Entirely the wrong way of looking at the subject.
First, you're kneecapping yourself from the word Go just by focusing strictly on a total failure.
Second, if you had $100K cash to buy a machine outright, you would use up all of it and end up cheaping out on everything you need to get it up and keep it running efficiently.
Even worse, you'd be whoring yourself for every single pissant job at any cost that comes your way, just because you have to make ends meet.

My view:
Have $100K in cash, finance the equipment at 100% ( say $100K with $2000/mo payments ), set aside $15K in a separate account for 6+ months of "emergency" payments, use the remaining $85K as operating capital.
As someone who's been on both sides, I much much rather have debt with sufficient amount of cash reserve, than to be debt free but always fighting for the next meal of whatever I might be able to afford.
The ultimate goal is to be debt free and have ample amount of cash, and you have to decide which gets you there first.
 








 
Back
Top