Business finance for engineering & machine shops

The long quote-to-payment cycle

Engineering and machine shops — subcontract machining, fabrication, toolmaking, precision components — work to a long and material-heavy cash cycle. A job typically starts with quoting and design, then buying raw material (billet, bar, plate, castings) and any special tooling, fixtures or inserts, then hours of skilled machine and labour time, before the part is finished, inspected, delivered and finally invoiced. Even then, manufacturing and OEM customers pay on terms — 30, 60, sometimes 90 days. From committing material to seeing the cash can be months.

That stretched cycle ties up real money on every live job, and the more work in progress on the shop floor, the more cash is locked up at once. Material prices for metals also move with commodity markets, so a quoted job can cost more to buy for than expected. A busy, well-utilised shop can be highly profitable on paper yet cash-tight, because so much is sitting in part-finished work and unpaid invoices. Working capital is what bridges the gap between buying the material and being paid for the finished part.

Funding a CNC machine or capacity upgrade

The defining capital decision in this sector is plant. A new CNC machine — a milling centre, lathe, multi-axis or turn-mill, a press brake or laser, or supporting kit like a bar feeder, probing or an additional fixturing setup — can transform what the shop can take on: tighter tolerances, larger or more complex parts, lights-out running, faster cycle times and better margin per component. It can also remove a bottleneck where one over-subscribed machine is capping the whole shop's output.

But a serious machine is a major capital item, and it earns nothing until it's installed, proven and loaded with work. An upgrade is often a direct response to demand — a customer needing volume you can't currently hit, or work you're sub-contracting out at a margin you'd rather keep. Short-term finance lets you commit to the machine now and repay as it works through the order book, rather than delaying the investment until you've saved the full cost while competitors take the work you can't yet produce.

Funding a confirmed production run

The cleanest use of a facility here is funding a confirmed production run or contract. When you win a batch or a scheduled supply agreement, you usually have to buy all the raw material and tooling up front, then fund weeks of machine and labour time, well before the first delivery is invoiced and far ahead of payment on terms. The order is firm and profitable — the only constraint is the cash to resource it.

Working capital removes that constraint. With a purchase order or supply schedule in hand, a facility lets you buy the material, commission the tooling and run the batch, then repay as the customer pays. It means the size of contract you can accept is governed by your capacity and capability, not by how much material and machine time you can fund out of cash on hand — which is exactly what lets a shop step up to larger, repeating OEM work rather than staying stuck on small one-offs.

What to weigh up before you borrow

Pressure-test the decision against your real jobs and terms:

• Tie it to confirmed work. Borrow against a signed PO, a production schedule or a machine that will demonstrably win and produce more work — not against speculative enquiries.
• Machine payback. For a CNC or capacity upgrade, estimate the added margin, in-housed work and removed bottleneck per month and confirm it comfortably clears the repayments and any fees.
• Mind material-price and receivables timing. Allow for metal-price movement on a quoted job, and make sure the facility bridges to when the customer actually pays.
• Total repayable and early settlement. Get the full figure up front and check you can clear it early once a batch is invoiced and paid.

This is general information, not advice on your specific accounts — model it against your own numbers or with your accountant.

How company-only short-term finance fits

Credicorp lends to the limited company behind the shop, with no personal guarantee — the facility is the company's liability, so your home and personal assets aren't pledged against it. As an exempt business lender providing working capital rather than regulated consumer credit, the focus is on how the business trades, which suits a job-and-batch operation waiting on long quote-to-cash cycles.

For a defined cost like a CNC machine, a business loan gives a clear lump and schedule. For the job-by-job rhythm of buying material and tooling and funding a production run to its first payments, the revolving Credicorp Flex line lets you draw only what each contract needs and repay as customers settle. You can apply online to see indicative terms first.