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Equipment Financing With Installation and Training Costs

The machine price is often only part of the real project budget.

A $180,000 production machine may also require rigging, installation, calibration, commissioning, software and operator training before it can generate revenue. Whether those expenses can be included in equipment financing depends on the provider, the asset and how closely each cost relates to putting the equipment into productive use.

Quick Answer: U.S. equipment financing can sometimes include installation, commissioning and manufacturer training, but providers do not treat every soft cost the same way. Itemize the complete project before applying. Costs closely tied to putting the machine into service are generally easier to evaluate than consulting, subscriptions, renovations or training unrelated to the equipment.

Can equipment financing include installation costs?

Yes, potentially.

Current U.S. programs show that installation can be included in some equipment-finance structures. U.S. Bank currently says qualifying equipment agreements can include additional costs of up to 25%, including installation, tax and freight. Santander advertises qualifying equipment financing that can cover costs including taxes, freight, installation, software, warranties and training. Those are individual provider programs—not universal industry rules. U.S. Bank

Installation is generally easier to connect to equipment financing when it is directly necessary to make the financed asset operational.

Examples can include:

• Unloading and positioning a machine.
• Mechanical assembly.
• Equipment-specific electrical connection.
• Calibration.
• Factory setup.
• Commissioning.
• Initial testing.

The financing question becomes more difficult as the project moves away from the machine itself.

Installing a $300,000 CNC machine and paying $12,000 for rigging is different from buying a $150,000 machine while spending another $150,000 redesigning the factory.

Both may be legitimate business investments.

They do not provide the financing provider with the same equipment collateral.

Can operator training be financed with the equipment?

Potentially.

Training has an obvious business purpose when employees need it to safely and effectively operate a newly purchased machine.

It still has less recoverable collateral value than the machine.

If a financing company advances $200,000 against a machine, there is a physical asset that can potentially be recovered and resold.

If it advances $20,000 for employee training, the training cannot be repossessed.

That distinction matters in underwriting.

Santander's current U.S. equipment-finance materials specifically identify training among costs that may be included in qualifying transactions. That establishes that training financing exists, but it does not mean every provider will finance it or every training program qualifies. Santander Bank US

A $250,000 machine with $7,500 of manufacturer training remains predominantly an equipment transaction.

A $100,000 machine bundled with $100,000 of consulting and training presents a very different credit and collateral profile.

Always show training as its own line item.

Do not ask the equipment vendor to bury it inside the equipment price.

What are soft costs in equipment financing?

Soft costs are project expenses that support the equipment purchase but are not the primary durable asset.

Depending on the project, they can include freight, rigging, installation, calibration, commissioning, software, training, engineering and certain site work.

Not all soft costs have the same relationship to the equipment.

Think of the project in layers.

Equipment-specific costs are expenses without which the asset cannot reasonably be delivered or placed into service. Freight, rigging, calibration and factory commissioning often fall closer to this category.

Operating-support costs can include operator training, required software and initial technical setup. These may be necessary, but they generally offer less collateral value.

Facility costs include major electrical upgrades, foundations, structural modifications or renovations. Those can become improvements to the building rather than identifiable equipment.

Ongoing expenses such as annual software subscriptions, maintenance contracts, consulting and future employee education may have even less reason to be amortized over the same term as a long-life machine.

Before applying, build one itemized project budget rather than presenting only the machine price. Mehmi's equipment financing documents checklist explains how the vendor invoice, equipment information and supporting documents should fit together.

Does the SBA allow financing of equipment installation?

For eligible U.S. small businesses, SBA-backed financing can provide another route.

The SBA currently states that 7(a) loan proceeds can be used for the purchase and installation of machinery and equipment. Its lender guidance also says an equipment or leasehold-improvement loan term can include a reasonable additional period of up to 12 months when necessary to complete installation or improvements. Eligibility, credit approval and final terms still depend on SBA requirements and the participating lender. Small Business Administration

That does not establish a rule for ordinary bank, lease-company or specialty equipment financing.

It confirms that installation is a recognized part of an equipment project within at least one major U.S. financing program.

Training should still be analyzed separately. The fact that installation qualifies under a particular program does not automatically make every consulting or training expense eligible.

How should you present installation and training to a lender?

Use an itemized vendor quote.

Instead of submitting:

Production system: $250,000

submit something closer to:

• Physical machine: $210,000.
• Freight: $7,500.
• Rigging and positioning: $6,500.
• Installation: $10,000.
• Calibration and commissioning: $6,000.
• Software: $4,000.
• Operator training: $6,000.

The total is still $250,000.

But credit can now determine which components it is willing to finance.

This also protects the borrower.

If the provider approves the machine and installation but excludes training, you know the additional cash requirement before closing.

Mehmi's guide to comparing written equipment financing offers is useful once each provider has established exactly which costs it will include.

Illustrative example: $210,000 equipment project with training

Consider an illustrative U.S. manufacturer installing a new production machine.

The complete project consists of:

• Machine: USD $180,000.
• Installation and commissioning: $20,000.
• Operator training: $10,000.
• Total project: $210,000.

Assume the financing provider is willing to finance the machine and installation but does not include the training.

That creates $200,000 of approved project costs.

Assume:

• Borrower contribution: 10% of approved costs, or $20,000.
• Amount financed: $180,000.
• Illustrative fixed nominal annual interest rate: 9.00%.
• Term: 60 months.
• Payments: monthly in arrears.
• Documentation/origination fee: 1%, or $1,800, paid separately.
• Balloon payment: none.

Taxes, insurance, freight, maintenance, filing costs and other expenses are excluded.

The calculated monthly payment is approximately $3,736.50.

Across 60 months, scheduled principal and interest total approximately $224,190.24.

Approximately $44,190.24 represents interest.

Because the $10,000 of training is excluded, the company needs approximately:

$20,000 contribution + $10,000 training + $1,800 fee = $31,800 of cash

in addition to the financed amount.

Total modeled nominal cash outflow through repayment is approximately $255,990.24.

These terms are illustrative, not a Mehmi financing offer, customer result or representation of current market pricing.

What if the training were financed too?

Assume instead that the provider approves the full $210,000 project under the same illustrative terms.

With a 10% contribution, the business contributes $21,000 and finances $189,000.

The estimated monthly payment becomes approximately $3,923.33.

Across 60 payments, principal and interest total approximately $235,399.75.

Assuming the same 1% fee methodology, the fee would be $1,890.

Initial modeled cash falls from $31,800 to approximately $22,890, preserving about $8,910 at closing.

But total nominal cash outflow rises to approximately $258,289.75 because the business is financing an additional $9,000 rather than paying the excluded training cost from cash.

That is the decision.

Financing training can preserve working capital today, but it can also mean making payments on a short-lived expense for five years.

Should you finance training just because you can?

Not necessarily.

Match the financing term to the economic benefit of the expense.

A machine may remain productive for ten years.

One week of operator training does not.

If the training cost is modest and the business has sufficient liquidity, paying it from cash may produce cleaner economics.

If the training package is substantial and paying it upfront would materially weaken working capital, financing some of it may be reasonable when an approved structure is available.

Consider what the cash would otherwise do.

A manufacturer may need liquidity for raw materials, payroll and production ramp-up immediately after the machine is installed.

Preserving $20,000 can therefore be worth more operationally than minimizing every dollar of finance charge.

For mature businesses making that decision, Mehmi's equipment financing guide for established U.S. businesses explains why cash reserves should be analyzed alongside the equipment payment.

Can installation costs increase the required down payment?

Potentially.

A lender may be comfortable financing a high percentage of a mainstream machine because the equipment provides identifiable collateral.

The analysis can change when a significant part of the request consists of costs that cannot be recovered through an equipment sale.

Consider two $300,000 projects.

The first consists of $280,000 of machinery and $20,000 of delivery and setup.

The second consists of $160,000 of machinery and $140,000 of integration, consulting, construction and training.

The project totals are equal.

The collateral packages are not.

A provider may therefore finance different percentages, request more cash or separate certain costs into another structure.

For specialized or used equipment, equipment appraisal and collateral value becomes especially important.

For older equipment, also consider whether the machine's age and remaining useful life justify financing installation expenses over the proposed term.

Spending $60,000 to install a machine with limited remaining productive life deserves a different analysis from installing a new machine expected to operate for another decade.

What about software bundled with training?

Separate perpetual or equipment-specific software from recurring subscriptions.

A license required for the machine to function can be closely connected to the equipment.

A one-year cloud subscription is different.

Similarly, initial programming that makes a robotic cell operational presents differently from an ongoing consulting arrangement.

Ask whether the provider is financing:

• The software license.
• Initial implementation.
• Recurring subscription charges.
• Technical support.
• Employee training.

Do not assume all technology-related expenses receive the same treatment simply because they appear on the same vendor invoice.

What if major electrical or building work is required?

This is where equipment financing can stop being the best tool for the complete project.

A $5,000 machine-specific electrical connection can be directly tied to installation.

A $150,000 plant upgrade involving new service capacity, transformers, panels, structural work and permanent improvements may belong partly in a real-estate, leasehold-improvement or another capital structure.

Build the entire project budget first.

Then separate:

equipment costs → equipment installation → facility improvements → working capital

Trying to force every expense into an equipment loan can leave the business with the wrong repayment term or insufficient operating liquidity.

If the project includes several assets or pieces of equipment, make sure the financing structure also fits how those assets will be used and eventually replaced. Comparing equipment loans and leases by total cost can help if ownership structure is still undecided.

What if the equipment requires a deposit before installation?

Plan this before paying the vendor.

Custom equipment can involve a purchase-order deposit, fabrication payments, a pre-shipment payment and final installation or commissioning payments.

An equipment approval does not automatically mean the financing provider will make advances before the finished asset is delivered.

If progress payments are required, present the complete vendor schedule during underwriting.

A large nonrefundable deposit can create a serious cash problem when the financing company will fund only after delivery.

If an existing machine is being replaced or traded and another creditor still has a lien, review Mehmi's guide to equipment financing with an existing lien so the payoff and new equipment transaction are coordinated.

What documents help finance installation and training?

The provider needs enough detail to distinguish financeable equipment costs from expenses that may require cash.

Prepare the equipment quote and separately identify installation, commissioning, software, training and other project expenses.

Also be ready with the business documents requested for the transaction, which may include current financial statements, bank information and an existing-debt schedule.

Explain why the additional costs are necessary.

For example:

“The manufacturer requires two days of operator and maintenance training before it will certify the machine for production.”

That is more useful than simply listing "$12,000 services."

For newer companies, underwriting may place greater weight on owner experience, liquidity, contracts and projections. Mehmi's equipment financing guide for new businesses explains how those files differ.

Credit still matters, but there is no universal score that determines whether installation or training can be included. Review Mehmi's U.S. equipment financing credit guide for the wider underwriting picture.

Can approved project costs change before funding?

Yes.

The final transaction may still be subject to equipment, vendor, invoice, insurance and documentation review.

If the original quote included $15,000 of installation and the final project now requires $65,000, tell the financing provider before the work is performed.

The additional amount may need another credit review.

Likewise, adding training, software or facility work after approval can change the amount financed or cash contribution.

Mehmi's guide to equipment preapproval versus final approval explains why an approved financing amount should not be interpreted as permission to modify the project without review.

Does financing installation change tax treatment?

Do not assume the lender's decision determines federal tax treatment.

Financing eligibility and tax classification are separate questions.

IRS tangible-property guidance generally requires taxpayers to distinguish currently deductible expenses from costs that must be capitalized in connection with acquiring, producing or improving tangible property. The treatment of installation, training, software and other project expenses depends on the facts and applicable rules. IRS

Have a U.S. tax professional review the actual invoices and financing structure.

The fact that a provider agrees to finance a $10,000 cost does not determine whether your business deducts, capitalizes or otherwise accounts for that cost.

Frequently asked questions about installation and training financing

Can 100% of installation costs be financed?

Potentially, depending on the provider, borrower and project. There is no universal 100% rule. Current U.S. programs show that installation costs can be included, but provider-specific limits and underwriting still apply. U.S. Bank

Can manufacturer training be rolled into an equipment loan?

Potentially. Training directly related to operating the financed equipment may be considered by some providers. Santander currently identifies training as an eligible cost within its qualifying equipment-finance program. Other lenders can use different policies. Santander Bank US

Does installation count as part of the equipment's value?

Not necessarily dollar for dollar. Installation may be necessary to place the asset into service, but much of that cost may not be recoverable through resale. A financing provider can therefore treat installed project cost differently from collateral value.

Can I finance employee travel for equipment training?

Do not assume so. Travel, lodging and employee time are even further removed from the physical equipment than manufacturer training itself. Itemize them and ask whether they are eligible rather than embedding them in the equipment invoice.

Should I use a business line of credit for training?

Possibly when the expense is short-lived and the line remains available for normal operating needs. But using too much revolving capacity for a long-term equipment project can leave less room for payroll, inventory or receivable timing once the machine enters production.

Does an equipment loan require a personal guarantee if installation is included?

Potentially. Including installation or training does not itself determine guarantee requirements. A provider can still require owner support based on the borrower and transaction. Review Mehmi's personal-guarantee guide for U.S. equipment financing.

Finance the complete equipment project, not just the machine

Before comparing financing, calculate what it costs to put the equipment into productive use.

Separate the machine, freight, rigging, installation, calibration, commissioning, software, training and facility work.

Then determine what the financing provider will actually include.

Mehmi Financial Group is a Canada-based commercial financing brokerage and intermediary, not a direct lender. Independent providers determine approval, eligible project costs, pricing, collateral, guarantees and final funding terms. Mehmi does not guarantee that installation, training or any other soft cost will qualify for financing. Mehmi Financial Group

U.S. availability depends on the jurisdiction and transaction. Under Mehmi's current terms, unless it confirms an applicable authorization or exemption for a specific transaction, Mehmi does not accept or broker commercial financing applications involving borrowers or recipients located or principally based in California, Illinois, Missouri, Nebraska, North Carolina, North Dakota or Vermont. Additional product-specific restrictions can apply. Mehmi Financial Group

To discuss a complete equipment project, provide the amount in USD, U.S. state, equipment price, installation and training costs, vendor, intended use and required timing. Call 833-863-4644 or contact Mehmi Financial Group. Mehmi Financial Group

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