At Ausmach we are machinery and manufacturing experts so sometimes we look over at the desk and see that the books have grown a little dusty. That’s why we partner with Manufin to help us brush off the dust and support our access to industry-leading financial benefits.
There can be a lot of financial jargon that flies around, and it doesn’t always make sense – or add up! But the team at Manufin aren’t just financial wizards, they’re also manufacturing experts, so when they spoke our language by showing us the bottom line we understood: increase profits!
So, how can you use financing to start or grow your business?
Manufin explained that there are two major benefits to financing: cash flow and tax advantages. Now, tax advantages are pretty simple and no different to doing your personal taxes. Reduce your taxes at tax time or maybe even get a little something back. Now that’s a big win!
But cash flow is a little trickier, because it all sounds a bit too good to be true.
Well yes…and no.
At the end of the day there does need to be a demand for your products and services. But with the Australian Manufacturing Industry predicted to continuously grow, so too are your prospects for continuous work. So, if the customers are lining up at your door, how do you equip yourself with the tools to service everyone? By financing!
Let’s use some round figures as an example. Let’s take two identical small businesses with the same experience, costs and number of resources. Business A decides to add a new Edgebander to their production line through a financing loan. Business B continues operating as usual.
Each business has 10 available jobs per month. Each job costs them $7, 500 and they charge their customer $15, 000.
Business A are approved for a loan on a $200, 000 brand new Edgebander. Interest and fees will be added to this and the loan will be paid off monthly over a 5-year period.
|One Month (Example*)|
With Machinery Financing
|How many jobs your business can handle||10||5|
|Cost of total jobs on the business||$75, 000||$37, 500|
|Sales Profits||$150, 000||$75, 000|
|Profits after costs||$75, 000||$37, 500|
|Take out the cost of your monthly loan repayment||$3, 894*||0|
|Gross Profit||$71, 106||$37, 500|
*This is an accurate example, but remember, your loan repayment amount will be subject to, but not limited to, your financial history, business value, the amount of your loan, the term of your loan, fees and interest rates.
The capacity to increase your offering, both in quantity and value is imperative for growth. So, take the time to scratch out some calculations and call a manufacturing and financing expert for their advice. Financing could bring new customers, new machinery and increase profits. And no, it’s not too good to be true!
Things to Remember:
- You operate a unique business, so make sure your new machinery caters for exactly what you need to increase quality production.
- Try to invest in a machine that will support your operations long-term, financing is not a quick-fix solution.
- Loan repayments must be made, even during the occasional slow period, make sure you factor this into your budget.
- Don’t forget to ask your financing company what happens once the loan is paid off. If a number of options aren’t available to you – better look elsewhere.
Interested in how financing could help you start or grow your manufacturing business? Just want to know your options? Contact the friendly experts at Manufin and they’ll run all the numbers for you!