Can Tooling, Software and Training Be Included in Equipment Financing?

Manufacturing equipment often needs more than the machine

A CNC can arrive without the fixtures needed to hold the first part. An automation cell may need end effectors and programming. A packaging line may require change parts. A machine may also need licensed software and operator training before production starts.

If those costs are material, they should be part of the financing discussion from the beginning.

Tooling is easier to review when it has a clear relationship to the equipment

A lender is more likely to understand tooling that is durable, identifiable and required to operate the machine. Examples can include fixtures, dies, moulds, jigs, workholding, dedicated change parts and certain permanent accessories.

Consumables and general inventory are different. Cutting inserts, raw material and short-life supplies may be important to the business, but they are not the same type of asset as a machine or durable tool.

Software can be part of the project

Modern manufacturing equipment may depend on software for machine control, programming, nesting, inspection, automation or production management.

The lender will want to know whether the software is permanently tied to the equipment, whether it is a perpetual licence or subscription, and whether the cost is on the equipment vendor’s invoice or a separate supplier contract.

Do not hide a large software cost inside the equipment price. Identify it clearly.

Training has a different asset profile

Operator and maintenance training can be necessary to get value from the equipment, but training itself does not create a hard asset the lender can repossess.

That means lenders may treat it differently from the machine. Some financing structures may include it, while others may require the business to pay it separately.

BDC specifically advises equipment buyers to budget for training, which is a useful reminder even when it is not financed.

Extended warranties and service packages should be itemized

A vendor may sell the machine with a warranty extension, preventive-maintenance package or spare-parts kit.

Those costs may be useful, but the lender needs to see what they are. Itemize them instead of presenting one bundled invoice with no breakdown.

Why lenders care about the mix of hard and soft costs

A financing company can recover value from a machine if it ever has to realize on the asset. It cannot recover value from completed training or consulting work in the same way.

As the percentage of non-asset costs increases, the transaction can look less like equipment financing and more like general project financing.

That does not automatically make the project unfinanceable. It changes how the file needs to be structured.

How to present the project cleanly

• Machine: $ amount
• Permanent tooling: $ amount
• Software: $ amount
• Training: $ amount
• Warranty or service: $ amount
• Freight and rigging: $ amount
• Installation: $ amount

You do not need to use those exact categories, but the lender should be able to see what it is being asked to finance.

What if tooling comes from a different supplier?

That is common. Provide the separate supplier quote and explain how the tooling connects to the machine.

If tooling will be delivered later than the machine, tell the lender. Funding schedules may need to reflect different delivery dates.

Frequently asked questions

Can custom dies or moulds be financed?

Potentially. They are easier to evaluate when they are durable, identifiable and tied to the production equipment.

Can CAD or CAM software be financed?

Potentially, depending on the lender, licence structure and how the software relates to the machine.

Can operator training be included?

Some structures may allow it, but training is a soft cost and lender treatment varies.

Can raw materials be included with equipment financing?

Usually that is a working-capital question rather than an equipment financing question. It should be identified separately.

Show the lender the full project, not a mystery bundle

The easiest way to lose flexibility is to submit one large invoice with no explanation. Break out the machine, durable accessories and soft costs so the lender can make a clear decision.

If you have a project budget, send it with the equipment quote and Raymond Leigh can review the structure.

How permanent accessories differ from consumables

A lender can usually understand durable accessories because they remain with the equipment and have a useful life beyond one production run. Consumables behave differently because they are used up in normal operations.

That is why a $40,000 rotary table may fit the equipment story more naturally than $40,000 of cutting inserts or raw stock.

How to handle subscription software

Subscription software deserves special attention because the borrower may be paying for access rather than buying a permanent asset. If the machine requires an annual software subscription, separate that recurring operating expense from any perpetual licence or capitalized software cost.

The lender can then decide what belongs in the equipment financing and what should remain an operating expense.

What about integration engineering?

Automation and custom manufacturing projects often require engineering hours for programming, controls integration and commissioning. Those services can be essential, but they are still services.

Itemize them. A lender may include some project services, exclude them, or require the borrower to contribute more cash when service costs become a large portion of the request.

Build the financing request around useful life

Durable tooling and machine software that will be used for years fit a long-term capital project more naturally than short-lived training or consulting. That does not determine eligibility by itself, but it is a useful way to think about the mix of costs.