The new frontier of U. S. Manufacturing is here! Advanced
Manufacturing uses innovative technologies and methods
to improve a company’s ability to be competitive in the
manufacturing sector. It does this by optimizing all aspects of
the value chain, from concept to end-of-life considerations.
Advanced Manufacturing employs automation, computation,
software sensing and networking to create greater efficiencies.
It can be found in just about every industry, including
electric vehicles, robotics, air structures, medical devices,
pharmaceuticals, high volume goods, rapid prototyping,
aerospace, and military.
The last few years have seen large investment in Advanced
Manufacturing, both at the federal and state level. In 2022,
President Biden signed into law the CHIPS Act of 2022. This Act
provides the Department of Commerce with $50 Billion for the
development of a suite of programs to strengthen and revitalize
the U.S. Position in Semiconductor research, development, and
manufacturing.
At the local level, Governor Hochul announced a $290 Million
Electricity Substation and Green Hydrogen Fuel Production
Facility in Genesee County at the STAMP site. STAMP is a
1,250 acre site that will be home to projects that include
semiconductor manufacturing, renewables manufacturing,
biopharma manufacturing, and other high capacity industries.
As you can see, Advanced Manufacturing is the future of
U.S. Manufacturing and is receiving large investments both
nationally and locally. With the increase in the manufacturing
sector, comes the need for additional financing. CNB offers a
wide array of financing options to accommodate equipment
purchases, permanent working capital and lines of credit to
assist with the growth of your company.
Leasing allows you to try out the equipment/
vehicle without making a long-term commitment. If the asset
does not meet your needs, you can return it at the end of the
lease. This is a good option for assets that quickly become
obsolete due to advances in technology (ie. computer hardware,
software, and communications equipment). Continuing to lease
those assets allows you to upgrade so you can remain up-to-date
with the newest technology.
On the other hand, purchasing the asset provides you with the
ability to build equity. Much like a decision to buy a car, the value
of the car after your final payment has been made represents
your equity. You have the option to sell it for cash or you can use
the value of the vehicle toward a trade in for a new model.
A good rule of thumb is if the asset’s useful life to you exceeds
3 years, purchase it. If it’s less than that, then you may want to
consider a lease.
These are loans that are usually repaid in monthly
payments over a set period of time. Term loans are usually paid
back between 1 and 10 years, and the specific equipment being
financed is used to collateralize the loan. Banks tend to finance
up to 90% of equipment purchases with term loans and offer
your choice of a fixed interest rate or a variable interest rate.
Equipment lines of credit offer a
hybrid between a line of credit and a term loan. As you have
equipment needs, you can draw from the available balance with
a new term note with a set repayment term. As you repay the
principle of the loan, the line of credit replenishes itself by that
amount of principle repayment. Equipment lines are useful for
companies that make several equipment purchases per year as
the line offers the company a pre-approved amount of money to
draw upon for equipment purchase without having to come to
the bank for approval with each purchase.
A line of credit is a revolving
credit facility generally used for short-term working capital.
Companies will utilize a line of credit as their sales increase and
receivables grow. The line of credit affords a company cash flow
to cover expenses, such as payroll, until receivables begin to
flow in. Lines of credit will typically require a 30 day out of debt
period measured annually.
Advanced Manufacturing is an exciting new frontier for U.S.
based manufacturing companies. Remember, it is important to
speak with your accountant and financial services professional
about these decisions. They will guide you through the process
to help determine what the best financing structure is for you
and your business.
Call our Commercial Lending Team today at (585) 419-0670 to
discuss your financing options.