Machine shops usually finance CNC mills and lathes with equipment financing secured by the machine, new or used, and cover material and payroll on long-paying jobs with working capital or a line of credit. Bank lenders and specialist equipment lenders both finance machines.
An article from Flintview Business Capital in San Luis Obispo, California on how machine and fabrication shops finance CNC equipment, tooling, a larger bay and material, with San Luis Obispo County, CA manufacturing counts and an invented mill purchase.
Used CNC Machine Financing for a San Luis Obispo, CA Machine Shop: Fiber Lasers and Tooling
Used CNC machines are commonly financed, because they hold value and have an active resale market. A partner wants the make, model, year, control, hours and condition, and may set a shorter term than for a new machine. Tooling, workholding and software are often bought with the machine and can be included in the same agreement.
Illustration only, invented figures: a $120,000 used fiber laser over 60 months at an annual rate of 9.75% is about $2,535 a month, before $18,000 of tooling (our arithmetic).
County Business Patterns counted 52 fabricated metal product manufacturing establishments, the industry that includes machine shops, in San Luis Obispo County, CA for 2023, with 747 paid employees. See machine shop loans.
A used machine bought from a dealer usually comes with an inspection and sometimes a short warranty; one bought at auction or from another shop may not. Partners can finance either, but they read the condition report and may ask for an independent inspection for a private sale. Rigging, transport and installation can run to a meaningful share of a used machine's price, so include them.
Industrial Equipment Financing and a Larger Bay: Notes for San Luis Obispo, CA Machine Shops
A larger bay is a building project: more floor, power, compressed air and sometimes a crane. If the shop leases, the landlord must agree; if it owns, the building may secure the loan. A term loan for the bay and equipment financing for what goes in it keeps each request clear.
Illustration only, invented figures: a $140,000 bay expansion over 120 months at 9.5% costs about $1,812 a month (our arithmetic). See business term loans.
Power can surprise a shop expanding its bay. Larger machines may need a bigger electrical service or a transformer, and the utility's timeline for that work can set the date the new machines can run. Ask early and include the cost.
Working Capital for Manufacturing When a San Luis Obispo, CA Machine Shop Needs Saws
Working capital for manufacturing covers the time between buying material and paying operators, and getting paid by customers. A shop adding saws for a large order may finance the saws as equipment and carry the bar stock and labor on a line of credit until the customer pays. Illustration only, invented figures: a $32,000 saw and $28,000 of bar stock for one large order.
The manufacturing sector as a whole had 469 employer establishments in San Luis Obispo County, CA for 2023, with 7,897 paid employees and $500.4 million in annual payroll (County Business Patterns). See business line of credit.
Long receivables are the core of the working capital question. A shop whose customers pay in sixty days carries two months of labor and material on every job; growth makes the gap larger, not smaller. A line sized to the receivables, and paid down as customers pay, matches the money to the gap.
An Invented Five-Axis Mill Purchase at a San Luis Obispo County, CA Job Shop
Illustration only, invented figures: a job shop buys a new five-axis mill to take on more complex parts.
| Item | Amount |
|---|---|
| Mill, installed | $235,000 |
| Term | 84 months |
| Annual rate | 8.95% |
| Monthly payment (our arithmetic) | $3,775 |
| Total of payments (our arithmetic) | $317,098 |
The shop sets the payment against the added work: the purchase orders the mill makes possible, the hours it will run, and what the shop now sends out or turns away. A partner reads that alongside the shop's financial statements and customer list.
Leasing is the alternative: a monthly payment for use of the mill, with an end-of-term choice to buy, return or renew. Compare the totals and the end-of-term terms. See equipment financing.
A partner may also ask about the operator: who will program and run the new mill, and whether the shop has run five-axis work before. Training included in the machine quote, or an experienced hire, answers that. The ramp-up period before the mill runs full shifts is worth building into the plan.
Purchase Orders, Machine Quotes and Customer Terms a San Luis Obispo County, CA Shop Gathers
A shop's funding file:
- Customer purchase orders and the backlog they add up to.
- The machine quote, with tooling, installation and training.
- Customer payment terms and the receivables aging.
- Twelve months of bank statements and two years of financial statements or tax returns.
- The machines already under loan or lease, and what each costs per month.
Customer concentration matters: a shop with most of its work from one customer will be asked about that relationship. See the San Luis Obispo, CA page for ZIP 93401 sector counts.
Financial statements matter more for larger machines. A partner financing a six-figure mill may ask for statements prepared or reviewed by an accountant, along with the owner's personal financial statement if a guarantee is part of the offer.
By Flintview Business Capital · Updated
