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Equipment Financing With Installation and Training Costs

The machine price is often only part of the project.

A $180,000 production system may also require freight, rigging, electrical work, commissioning and operator training before it can generate revenue. Whether those costs can be financed depends on how closely they relate to the equipment, how large they are relative to the hard asset and the financing provider’s program.

Quick Answer: U.S. equipment financing can sometimes include installation, freight, rigging and initial training costs, but eligibility is provider- and transaction-specific. The physical equipment usually provides the strongest collateral support, so larger amounts of training, consulting, software or permanent building work may require more cash or a separate financing structure.

Can equipment financing include installation and training costs?

Potentially.

Some U.S. equipment-finance programs expressly allow certain “soft costs” to be included with the physical equipment.

PNC currently states that certain soft costs incurred when acquiring equipment can be financed, including delivery charges, sales taxes, installation and training costs. U.S. Bank’s current equipment-financing program says it can include up to 25% of additional costs such as installation, tax and freight. Those are examples of specific provider programs, not market-wide eligibility rules. PNC Bank

The important question is therefore not simply whether a cost is called “installation” or “training.” Credit needs to understand what the cost is, who is providing it and how directly it is tied to making the financed equipment operational.

For businesses still comparing the main structures, Mehmi’s equipment financing basics for American businesses explains the differences among loans, leases and equipment finance agreements.

What counts as a soft cost in equipment financing?

Soft costs are project expenses connected with acquiring and putting the equipment into service but that are not the primary durable machine itself.

Depending on the transaction, they can include:

• Freight and delivery
• Rigging and unloading
• Installation and commissioning
• Calibration
• Initial operator training
• Systems integration
• Certain directly related software
• Engineering tied to installation
• Warranties or service agreements under some programs
• Electrical or facility work directly related to the machine

Not all soft costs create the same collateral value.

A $12,000 freight bill moves the financed machine to the buyer. A $12,000 initial training package may help employees operate it. Both can be important to the project, but neither can generally be repossessed and resold like the machine itself.

That difference explains why larger non-equipment portions can make a provider more conservative.

Why does the percentage of soft costs matter?

Equipment finance is partly secured by the value of the equipment.

Suppose two projects each cost $250,000.

Project A contains $225,000 of identifiable machinery and $25,000 of freight, installation and initial training.

Project B contains $125,000 of machinery and $125,000 of consulting, renovations, software subscriptions and employee training.

Both projects cost the same amount. They do not provide the financing provider with the same collateral.

As the soft-cost portion grows, the provider may finance a smaller percentage of the total project, require more cash, shorten the term or separate some costs into another facility.

That is why the vendor quote should break the project into clear categories rather than presenting one combined “turnkey” price.

Mehmi’s equipment financing document checklist explains how itemized equipment and seller documentation fit into underwriting.

Can installation and commissioning be financed?

They can be among the easier soft costs to connect directly to the equipment when they are necessary to place it into service.

Examples include unloading and rigging a CNC machine, leveling a production line, connecting manufacturer-required controls, initial calibration, commissioning an automation cell and vendor setup required before operation.

SBA 7(a) is one federal program that expressly permits eligible proceeds for the purchase and installation of machinery and equipment. SBA also permits multiple-purpose 7(a) loans combining eligible uses. That does not mean ordinary equipment lenders must follow SBA rules, but it confirms that equipment and installation can form part of the same eligible capital project under an applicable U.S. program. Small Business Administration

Major structural, plumbing, electrical or other leasehold improvements may need separate treatment. Itemize them before applying.

Can employee training be included?

Sometimes.

Initial vendor training directly required to operate the new equipment can be easier to connect to the acquisition than broad employee-development costs.

For example, training two operators to run a newly installed laser cutter or medical device is different from financing an ongoing annual training program for the entire company.

PNC’s current equipment-finance materials specifically identify training among soft costs that can be financed in certain transactions. Its technology-finance program also describes a structure that can bundle services, maintenance and training with equipment. PNC Bank

That does not establish universal eligibility.

Ask whether the proposed provider will finance:

• Initial operator training only
• Vendor-required certification
• Travel related to manufacturer training
• Multiple years of training
• Ongoing support or service
• Training for future employees

The farther the expense moves from the initial acquisition, the more likely it is to receive different treatment.

Should you finance training over the full equipment term?

Not automatically.

A cost can be financeable without being sensible to finance for five or seven years.

Suppose a $7,500 operator-training package is consumed during the first month after installation. Financing it over 60 months preserves cash today, but the business continues paying financing cost on that one-time service for years.

It can still make sense when preserving working capital is more valuable than paying the training bill in cash.

Consider:

• Cash available after closing
• Total financing cost
• Expected equipment ramp-up
• Whether training is mandatory
• Whether the cost is one-time or recurring
• Whether training remains useful if employees leave
• Whether paying cash materially weakens operating liquidity

A business should not automatically finance every eligible soft cost merely because a provider permits it.

Mehmi’s equipment financing down-payment guide explains the broader tradeoff between reducing upfront cash and preserving liquidity.

Illustrative example: financing the complete installed equipment project

Consider an illustrative U.S. manufacturer purchasing a production machine.

The project budget is:

• Equipment: $180,000
• Freight and delivery: $12,000
• Rigging and installation: $18,000
• Initial vendor operator training: $6,000

Total project cost is $216,000.

The soft costs total $36,000, equal to 20% of the equipment price and about 16.7% of the complete project.

Assume, for illustration only, that the financing provider approves all four project components and requires a 10% cash contribution.

The financing assumptions are:

• Total approved project: $216,000
• Cash contribution: $21,600
• Amount financed: $194,400
• Fixed nominal annual interest rate: 10.25%
• Term: 60 months
• Payment frequency: Monthly
• Documentation fee: $1,500, paid separately
• Balloon payment: None
• Taxes, insurance, ongoing maintenance, future training and other expenses: Excluded

Using standard monthly amortization, the estimated payment is approximately $4,154.38.

Across 60 payments, scheduled principal and interest total approximately $249,262.76, including approximately $54,862.76 of interest.

Including the $21,600 contribution and $1,500 fee, total stated project cash outlay is approximately $272,362.76.

Now consider cash flow.

Assume the manufacturer normally has $8,000 per month available after ordinary operating expenses, cash taxes and existing debt, before the new equipment payment.

The $4,154.38 payment leaves approximately $3,845.62 in a normal month.

If available cash falls 20% to $6,400, the remaining cushion falls to approximately $2,245.62.

An actual provider might approve all, some or none of the $36,000 soft-cost package. Any excluded amount would require additional cash or another source.

The 10.25% rate, contribution and fee are hypothetical assumptions. They are not current Mehmi terms, market-rate estimates or an approval.

How do you decide what to finance and what to pay in cash?

Start with the costs required to make the equipment operational.

Freight, rigging, installation and commissioning usually have a clearer connection to the asset than recurring support, general consulting or future employee training.

Then consider how much cash remains after closing.

Paying every soft cost in cash can leave too little money for operations, while financing every eligible service can extend financing charges over years. Preserve enough liquidity without overloading the financed package.

For manufacturing expansions, Mehmi’s production-expansion equipment financing guide explains why equipment payments need to be evaluated alongside installation, production ramp and working-capital needs.

Does a loan or lease handle soft costs differently?

Potentially.

A loan, equipment finance agreement and lease can each have different rules for non-equipment costs.

Some lease structures are specifically designed to bundle equipment and certain services into one payment. PNC says soft up-front costs can be included in certain monthly lease payments, while its technology-finance offering can bundle services, maintenance and training. PNC Bank

A conventional lender may instead limit the soft-cost portion.

Do not assume a lease is automatically more flexible or a loan automatically cheaper.

Mehmi’s equipment loans versus leases total-cost guide explains how to compare ownership cost, while the equipment leasing terms and buyout guide covers purchase and return obligations.

What should the vendor quote show?

Ask for a line-item project quote.

The financing provider should be able to see:

• Equipment purchase price
• Accessories and attachments
• Freight
• Rigging
• Installation
• Calibration or commissioning
• Software
• Initial training
• Warranties or service contracts
• Taxes
• Building or site work

Do not ask the vendor to move a $20,000 installation charge into the machine price merely to make the project look like 100% hard equipment.

That can complicate vendor verification. A complete quote also clarifies who should receive each payment.

When are progress payments or deposits involved?

Custom machinery can require deposits, progress payments and a final balance before shipment or installation. The financing provider needs to agree to that schedule before the business relies on it.

An approval for the final equipment purchase does not automatically mean the provider will fund an early manufacturer deposit or make progress payments before the equipment is complete.

Installation and training may also be invoiced after delivery.

Confirm:

• Who receives each payment
• When funds can be released
• Whether the business must advance a deposit
• What evidence is required at each stage
• When the financing payment begins
• What delivery or acceptance document triggers final funding

A conditional approval can still change during those steps. Mehmi’s equipment preapproval versus final approval guide explains what may remain outstanding after initial credit approval.

How should you compare two offers with different soft-cost treatment?

Compare the complete project cash requirement, not merely the financed amount.

One provider might finance $210,000 at a lower rate while another finances the full $216,000 at a higher rate. Neither is automatically better.

For each offer, calculate:

• Cash due before funding
• Amount actually financed
• Monthly or periodic payment
• Number of payments
• Interest or finance charge
• Fees
• Purchase option or residual
• Early-payoff cost
• Soft costs excluded from financing
• Total cash the company must contribute to complete the project

Mehmi’s guide to comparing written equipment financing offers explains how to put different quotes on the same basis.

Can SBA financing cover installation and other project costs?

For eligible businesses and transactions, SBA 7(a) can be worth comparing when the project contains multiple eligible uses.

Current SBA guidance allows 7(a) financing for purchasing and installation of machinery and equipment, working capital, furniture and fixtures, and multiple-purpose loans combining eligible uses. Small Business Administration

That can help when the project includes equipment plus working capital for installation and ramp-up.

Participating lenders still underwrite SBA financing, and program requirements apply.

Do not assume initial employee training is automatically eligible merely because equipment installation is eligible. Ask the participating lender to classify each project cost before relying on the financing plan.

Frequently asked questions

Can freight and rigging be included in equipment financing?

Potentially. They are directly related to delivering and positioning the asset, and some U.S. equipment-finance programs expressly include such soft costs. Provider limits still apply. U.S. Bank

Can operator training be financed with the machine?

Potentially. Certain provider programs expressly allow training costs, particularly when they are directly connected with initial equipment implementation. Ongoing employee training may receive different treatment. PNC Bank

Can electrical work be included?

Sometimes. Equipment-specific electrical connections can be easier to connect to the project than major permanent electrical upgrades to the building. Itemize the work and ask the provider to classify it.

Can software be financed with equipment?

Potentially, particularly when the software is integral to operating the equipment. Recurring subscriptions or general business software can be treated differently.

Can maintenance agreements or warranties be financed?

Some equipment or technology-finance structures can include them. Review the period covered and whether financing a short-lived service over a long term makes economic sense. PNC Bank

Does financing installation change the tax treatment?

Not automatically. Financing eligibility and federal, state or local tax treatment are separate questions. Have a qualified U.S. tax professional determine the proper treatment of equipment, installation, training and other project costs.

Finance the installed project, not just the invoice

Budget the amount required to get the asset operating—not just the machine price. Itemize freight, rigging, installation, commissioning, software and training, then identify what the provider will finance and what still requires cash.

Mehmi Financial Group is a commercial financing brokerage and intermediary, not a direct lender. Independent providers determine underwriting, eligible soft costs, pricing and final funding conditions. Mehmi Financial Group

U.S. availability depends on the state, product and transaction. Under Mehmi’s current restrictions, unless an applicable authorization or exemption has been confirmed, general commercial loan-broker applications involving borrowers principally located in California, Illinois, Missouri, Nebraska, North Carolina, North Dakota or Vermont are restricted. Additional product-specific restrictions can apply. Mehmi Financial Group

To discuss an equipment project, share the amount in USD, U.S. state, equipment price, itemized installation and training costs, use of funds and purchase timing. Call Mehmi Financial Group at 833-863-4644, use the contact page, or review applicable equipment financing options. Mehmi’s current contact page confirms the phone number and asks business-financing inquiries to include location, amount and purpose. Mehmi Financial Group

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