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Canadian manufacturing isn’t dead — it’s changing. In 2023, manufacturing revenues reached $935.6 billion, the third straight year of growth. Statistics Canada And manufacturers are still running hot: industry capacity utilization sat around 78% for manufacturing at the end of 2024. Reuters
At the same time, a modern CNC machine or automated cell is a serious cheque:
Most small manufacturers can’t (and shouldn’t) write a cheque that big from cash. But sticking with obsolete equipment has its own cost: scrap, rework, long cycle times, missed orders, and shifting customer work overseas.
The real question isn’t “Can I afford new equipment?” It’s “How do I structure financing so new CNCs and lines actually improve my cash flow and competitiveness?”
For Canadian SMEs, that usually means:
Let’s break down the options in plain language.
Key point: CNC machines and production lines are long-life assets. They should be financed over years, not months — and not on short-term working-capital products.
A slightly unpopular opinion from the credit side:
If you’re buying CNC machines or line components with merchant cash advances or credit cards, the financing structure is more dangerous than the machine cost.
Good structures:
Risky structures:
Your CNC should be paying for itself over thousands of hours of runtime. That calls for payments sized and timed to your production and order book — not to a lender’s collection schedule.
Mehmi’s equipment financing suite is built around exactly that idea: use the machines themselves as collateral, and keep your operating line free for raw materials and payroll.
Key point: Leasing lets you spread the cost of CNCs and line components over their productive life, preserving cash and allowing for planned upgrades.
BDC summarizes it neatly: equipment financing lets you acquire long-term assets that boost productivity while protecting cash flow. bdc.ca+1 That’s especially true when you’re moving from manual or 3-axis work into multi-axis CNC, robotics, or integrated production lines.
With a Mehmi equipment lease you can typically:
If it has a serial number, is integral to production, and holds resale value, there’s a good chance it qualifies as eligible equipment. That can include:
Instead of one huge capital hit, leasing turns your modernization program into a planned monthly cost aligned with your throughput and margins.
For a lot of small manufacturers, the constraint isn’t just the CNC — it’s everything around it:
Those can typically be included in a broader heavy equipment financing or lease package, so the whole cell or line is funded together.
Key point: If you’re replacing multiple obsolete machines over a few years, an equipment line of credit gives you speed and predictability.
Most small manufacturers don’t replace everything in one shot. Instead, they:
Applying for a brand-new loan for every machine is slow and painful. A better approach is an equipment line of credit:
Benefits:
For manufacturers planning multiple upgrades (e.g., moving from three old mills to a small automated cell plus secondary ops), this structure can be the backbone of a multi-year modernization roadmap.
Key point: If you already own decent machines, you may be sitting on the collateral you need to fund your next upgrades.
A surprising number of shops have hundreds of thousands of dollars of paid-off machinery on the floor — but are still using high-cost debt for new projects. That’s where asset-based lending and sale–leaseback come in.
With asset based lending (ABL):
This works well when:
A refinancing or sales leaseback is more targeted:
This is particularly powerful if you:
It’s one of the most common strategies we see when a shop needs to replace obsolete machines while still relying on older ones for throughput during the transition.
Key point: CNC machines and lines should live on equipment facilities; inventory, tooling, software, and ramp-up costs should sit on working-capital facilities. Mixing them is how modernization plans go sideways.
Replacing obsolete equipment isn’t just the sticker price. You also have to fund:
That’s where the business loan side of the capital stack comes in.
Two core tools:
Together, they help you:
Mehmi’s business loans overview gives a good sense of how these tools fit alongside equipment leases and ABL.
If you’re ramping up production for a large OEM contract, you might also consider invoice or freight factoring on approved receivables:
This can bridge the gap between when the new CNC starts producing and when big customers actually pay.
For some projects, it makes sense to add a secured loan (tied to machinery, receivables, or real estate). For smaller, faster moves, a unsecured loan can plug specific gaps — for example, training or software modules that don’t have hard collateral.
The main rule: don’t use working-capital products to buy machines. Use them to make sure those machines are fully utilized once they’re on your floor.
Key point: Smart financing plus smart tax planning can significantly reduce the net cost of CNC upgrades — but you need to plan before the purchase.
Three big pieces for Canadian manufacturers:
On top of that, Federal Budget 2025 proposes a “productivity super-deduction” — accelerated write-offs for certain capital expenditures, including manufacturing and processing equipment first used before 2033. McMillan LLP+1
Translated into shop-floor language:
You should always confirm details with your accountant, but in many cases, leasing or financing a CNC today may be cheaper after tax than waiting and trying to pay in cash later.
Key point: Don’t treat each broken machine as an emergency. Treat your next 3–5 years of upgrades as a single capital plan with a blended financing strategy.
Here’s a practical roadmap for a small Canadian manufacturer:
List all key machines with:
Identify what’s truly obsolete versus what can be kept and maybe refinanced.
Ask:
This drives which CNC and line upgrades matter most. BDC’s guidance is clear: start with a capital plan and cost–benefit analysis, not a machine brochure. bdc.ca
Group your upgrades into waves, for example:
For each wave, estimate:
Work with a Mehmi advisor to decide:
Use Mehmi’s calculator to model different terms and scenarios so you know your payment envelope before you sign a vendor quote.
If you’re buying CNCs and line components from different suppliers, a vendor program structure can:
Once the first wave is installed:
And importantly: treat your financing as a living part of your strategy, not a one-time transaction. If performance or rates change materially, revisit whether a refinance or sale–leaseback could further improve cash flow.
If you’d like a second set of eyes on your plan, you can always reach out via Contact Us to walk through it with a Canadian credit specialist who knows manufacturing.
Profile (details changed for privacy)
The challenge
Customers were asking for:
The shop’s owner knew they needed:
Total capex, including tooling and install, was just over $900,000 — too much to fund from cash without starving operations.
The financing strategy with Mehmi
Working with a Mehmi advisor, they built a structure with four pillars:
The results, 18 months later
The key wasn’t a single low rate. It was a financing strategy that treated modernization as a multi-year project, not a series of desperate one-offs when old machines failed.
For most growing manufacturers, leasing or financing CNC machines through a dedicated facility is more effective than paying cash. It lets you align payments with machine life and production volume, while keeping cash available for inventory, staff, and R&D. A Mehmi equipment lease also gives you flexibility to upgrade when technology moves on.
Yes. As long as the equipment has clear value, good condition, and traceable ownership, many lenders will finance used CNCs and retrofit projects. Mehmi can assess used machines under their eligible equipment criteria and structure them via leases, asset based lending, or sale–leaseback.
You can aggregate multiple components — CNCs, robots, conveyors, inspection stations, material handling — into a single financing package. This often involves a mix of equipment financing and a pre-approved equipment line of credit, coordinated through a vendor program. One structured facility is usually cleaner than five separate loans.
Often yes. If your machines still have value, you can use refinancing or sales leaseback or asset-based lending to unlock equity and pay out high-cost loans or merchant cash advances. Mehmi will compare your existing debt against new structures and help you decide whether refinancing genuinely improves your cash flow.
Canada’s Capital Cost Allowance (CCA) rules and the Accelerated Investment Incentive provide enhanced first-year write-offs for certain manufacturing and processing machinery acquired and put into use within specific dates. Canada+1 Whether you pay cash or finance, you may benefit from these deductions — but financing often lets you invest sooner, while still managing cash flow. Always confirm the specifics with your tax advisor.
Start by modelling:
Tools like Mehmi’s calculator help you test scenarios before you commit. From there, a Mehmi advisor can blend secured and unsecured options, plus working-capital tools, into a structure that leaves room for surprises rather than running things razor-thin.
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