A lot of people I talk to have mixed feelings about loans. Generally, smart business owners shy away from taking on large loans with heavy interest rates because they know how long and costly that burden can be. That said, when it comes to financing or leasing manufacturing equipment, like packaging machines, there are some considerations that might shift your perspective.
Before we dive into loans and financial structures, let’s first address the core question: Why automate your packaging line in the first place? This decision is key to understanding how to approach paying for the equipment itself.
The Benefits of Automation (Real-World Example)
One of my clients, a dairy manufacturer in Central Florida, specializes in producing cream targeted at the Hispanic market. Here’s how automation transformed their operations:
Status Before Automation:
- Team: 15-20 employees manually packaging cream into plastic bags.
- Production Costs: $30,000-$40,000 monthly to produce 100,000 bags a month.
- Challenges: Quality inconsistency; Unreliable workforce; absenteeism affected operations; Bottlenecks in production capacity, capping growth potential.
Solution:
- Cost: They purchased two automatic baggers for around $266,000 (no sales tax).
- Financing Terms: 12% annual interest rate. 6 years (72 months) term. 10% ($26,600) down payment. $5,719 monthly payments.
- Outcome: Production capacity skyrocketed from 100,000 bags/month to 800,000 bags/month (400,000 per line). Monthly packaging costs dropped from $30,000 to $5,719.
Financial Insights: Loans, Depreciation, and Tax Deductions
Of course, you might say that there’s depreciation costs, that interest rates are outrageous now (they’ve always been), that I’m not accounting for machine downtime and maintenance costs. You might even think that it’s safer to keep doing what you’re doing or just resort to some cheaper option that doesn’t require for you to get into financing. Well, that might be true. I’m not here to convince you of anything. But in most cases, I see that the people that are more willing and prepared to grow don’t think that way. They commit to it and take the risks needed to get the results they want. Also, they end up realizing that the cost of investment if not much compared to fairly generous ROI, tax deduction benefits and peace of mind automation provides.
The Human and Business Impact of Automation
I love working with people, but somethings are just done better with automation. And talk about ergonomics and positioning human beings where they can actually create real value! Automation doesn’t just reduce costs; it reduces headaches. Here’s a few points to consider:
- Higher Quality: Machines deliver consistent output, reducing waste and boosting customer satisfaction.
- Reliability: Eliminating the unpredictability of human labor ensures smoother operations.
- Scalability: Automation positions your business to grow without proportional increases in labor costs.
Back to my dairy manufacturer client’s example, their automation investment not only cut costs, but it also removed bottlenecks, allowing them to expand production and serve larger markets.
Final Thoughts: It’s About the Goal, Not the Process. And the Goal is Growth
At the end of the day, investing in automation isn’t about the equipment itself—it’s about what the equipment enables. More sales, higher quality, happier customers, and a more efficient team are the real goals.
A loan with fair interest rates, flexible terms, and manageable down payments can be an effective way to finance automation without draining your company’s cash reserves. And if you choose the right equipment, from the right manufacturer, it can change your business in major ways.
Does this help?
Hope this short article helped you. I’d love to connect and exchange insights about automation, packaging lines, or anything related to scaling production efficiently. If you’re exploring options or just want to brainstorm ideas, feel free to reach out. I’m always happy to share what I’ve learned from helping companies like yours.
Ryan Cabral,
Brasil: tecnoxdobrasil.com.br
Disclaimer: None of this content should serve as the basis for your business decision. Consult with your certified accountant for professional financial advice.
