Top 3 financing mistakes we see injection molders make

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Should you pay cash for an injection molding press?

Usually not. A press is the most financeable thing in your building. It’s a specific, identifiable asset, it holds its value, and there’s a deep used market for it. Resin is the opposite. It gets used up, you buy it constantly, the price moves, and nobody will lend against a silo of material you’re about to melt. Same goes for payroll and the utility bills on a running floor.

Paying cash for a press means spending the money you’ll need for those bills on something you could easily have financed. Then the money for the next material buy, or for a new program that needs 90 days of working capital, has to come from somewhere worse.

I’d finance the press, because it brings in revenue while you pay it off. Keep your cash for resin, labor, and the gap between shipping a program and getting paid. Our guide to paying cash versus financing shows when each one makes sense.

A press is easy to finance. Resin, payroll, and utilities aren’t, so that’s where your cash should go.

Does the tooling on your floor count as collateral?

Not if a customer owns it. Walk a molding floor and you’re looking at hundreds of thousands of dollars in steel, and most of it doesn’t belong to you. Industry custom is that whoever paid for the tool owns it, no matter who stores it, maintains it, or runs it. For financing, that means it isn’t your collateral. A floor that looks asset-rich can support far less borrowing than the owner expects, and shops find this out in the middle of an application.

• Get ownership in writing on every tool. By the time you need that proof, the relationship with the customer is already strained.
• Document what’s really yours. If you build insert-based tooling and keep the unit mold base, that base is your asset. So are your own electrodes, patterns, and programs, as long as the contract doesn’t assign them away.
• Don’t build a borrowing plan around steel you don’t hold title to. Base it on the presses, auxiliaries, and other equipment that are actually yours.

There’s a second risk, too. When a program moves, the tool goes with it. If your capacity plan and your debt service both counted on that program, you lose the revenue and still owe the payment.

Should you finance just the robot or the whole cell?

The whole cell. Automation quotes come in with one headline number, and it’s the robot. Then the project gets built, and the arm turns out to be a fraction of what it costs to make the cell run. The rest is end-of-arm tooling, guarding and safety, conveyors, controls integration, electrical work, programming, installation, and the production time you lose during commissioning.

Molders routinely finance only the invoice they were handed. That leaves them borrowing for the robot and paying cash for everything around it, which costs more than the robot does.

Installation, integration, tooling, and freight can generally be included in an equipment finance agreement, so put the whole project on it. Ask before you sign, though, because it’s harder to roll soft costs in later. And plan the payments around commissioning. A cell that isn’t producing yet isn’t paying for itself, and that’s what a deferred first payment is for.

If you finance only the robot, you’ll end up paying cash for the bigger share of the project.

Why do busy molding shops still run short of cash?

Usually because their cash is in the wrong place. That’s what all three mistakes have in common. Molding margins are workable, so when a busy shop runs short, the problem is timing and how its deals were set up.

The shops that build equity use manufacturing equipment financing for the presses and other equipment they can borrow against, and they keep their cash for resin and the other bills nobody will finance. They also know which assets on the floor they actually own, and when they automate, they put the whole project on the agreement, soft costs included.

Which of these should a molder fix first?

I’d start with the first one. Cash you spend on a press can’t go to resin, and the resin bill shows up whether the program is paying yet or not. If you only fix one of these this year, finance your next press and keep the cash for material.

Already own your presses? Our guide to press leasebacks covers how to turn them back into cash.

Frequently asked questions

Should an injection molder pay cash or finance a press?

In most cases, finance the press and keep the cash. A press is strong collateral with a deep used market. Resin, payroll, and the gap between shipping a program and getting paid for it can’t be financed, and that’s what your cash reserve is for.

Can I borrow against customer-owned tooling?

No. Industry custom is that whoever paid for a tool owns it, no matter where it sits or who maintains it, so tooling that belongs to your customer can’t be pledged. A floor that looks asset-rich may support a lot less borrowing than you’d expect. Base your borrowing plan on the presses, auxiliaries, and equipment you actually hold title to, and get tool ownership in writing on every program.

Can installation and integration costs be included in equipment financing?

Usually, yes. End-of-arm tooling, guarding, conveyors, controls integration, electrical work, programming, installation, and freight can generally be rolled into an equipment finance agreement along with the machine. The common mistake is financing only the machine on the invoice and paying for the rest of the project out of pocket. Ask before you sign, since it’s harder to add soft costs after the fact.

What happens to my financing if a customer pulls their program and takes the tool?

The tool leaves with the program, and you still owe the payment. That’s why your capacity plan and your debt service shouldn’t both rest on one customer’s forecast. If one program keeps a press busy a good part of the time, count that as a financing risk when you choose the term and the payment.

What is the most common financing mistake in injection molding?

Spending cash on assets that are easy to finance. The three that come up most are paying cash for a press while resin and payroll go unfunded, assuming customer-owned tooling adds to what you can borrow, and financing only the robot in an automation project instead of the full cell, including installation and integration.

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This article is general information about commercial equipment financing and is not tax, legal, or financial advice, nor a commitment to finance. All figures are illustrative examples, not offers or quotes. All financing is subject to credit approval and underwriting. Rates, terms, and approval depend on the complete business and credit profile.