Rigging, engineering, controls integration, freight, commissioning, operator training — these "soft costs" pile up fast, and many banks simply won't put them on their books. That leaves manufacturers scrambling to cover the gap in cash, right when cash is tightest.
This guide breaks down what soft costs actually include, why traditional lenders balk at financing them, and how manufacturers can structure financing that covers the full project — not just the hard asset. Commercial Funding Partners (CFP) specializes in exactly this kind of structuring, funding equipment projects from $250,000 to $300 million with soft costs built in from day one.
Key Takeaways
- Installation, engineering, freight, software, and training can be rolled into equipment financing—not paid out of pocket
- Traditional banks often exclude "non-admitted assets," leaving a gap that soft-cost financing can close
- Milestone and progress-payment structures align funding with multi-month installation timelines
- Financing soft costs preserves working capital for payroll, materials, and operations during the build
What Counts as "Soft Costs" in a Manufacturing Equipment Project
Soft costs are everything around the machine that makes it actually work. That includes:
- Installation labor and rigging: moving, positioning, and anchoring equipment
- Engineering and design fees: layout, integration planning, structural work
- Freight and logistics: shipping, customs, specialized transport
- Software licensing: controls, manufacturing execution systems (MES), automation platforms
- Controls and automation integration: wiring, PLC programming, robotics tie-ins
- Commissioning and start-up: testing, calibration, factory acceptance
- Employee training: operator and maintenance certification
- Permitting and site prep: electrical upgrades, concrete work, code compliance
On a large automation or production-line project, these costs aren't a rounding error.
According to the Equipment Leasing and Finance Association, some equipment finance products package installation, training, software, and related services into a single facility because those costs are common and material on real projects.
Lenders draw a hard line between hard assets (the machine — collateral value) and non-admitted assets (the services around it). That distinction is the root of the whole financing problem.
Why Banks Often Won't Finance Installation and Soft Costs
Banks lend against collateral they can repossess and resell. A CNC machine has resale value. Engineering hours, commissioning labor, and training sessions do not. Once delivered, those costs can't be repossessed or liquidated.
That's the underwriting logic driving most bank policies, even though it's not a legal prohibition. ELFA's lease/loan comparison notes that leased equipment commonly serves as its own collateral, while a loan may require additional assets depending on creditworthiness. Soft costs simply don't fit that model.
This forces manufacturers into one of three uncomfortable positions:
- Pay soft costs in cash, draining working capital right when the project needs it most
- Take out a separate loan to cover the gap, adding complexity and another payment
- Delay the project until enough cash accumulates
Independent equipment finance lenders exist to close that gap. CFP's Non-Admitted Asset Financing was built to fund the costs traditional banks won't book: installation, controls integration, commissioning, training, project management, taxes, and certain construction-related costs, inside one structure.
How Financing 100% of Project Costs (Including Soft Costs) Works
Instead of financing just the invoice for the machine, a lender bundles the equipment price with every eligible soft cost into one facility. That means one underwriting process, one set of documents, and one financing structure covering the whole project.
Commonly financed soft cost categories include:
- Installation and rigging labor
- Controls and automation integration
- Commissioning and start-up
- Employee training
- Project management and certain construction-related costs
Progress Payments and Milestone Funding
Large automation projects rarely fund in one lump sum. CFP's Progress Funding structures disbursements around actual project milestones: deposits, engineering, fabrication, factory acceptance testing, shipment, installation, and commissioning. That structure supports build timelines that often run 6 to 18 months or longer.
Vectra Bank describes this same mechanism: periodic vendor disbursements tied to the percentage of work completed, rather than a single payment at delivery.
Interest-Only During Installation
While equipment is being installed and isn't yet generating revenue, interest-only periods ease the cash-flow squeeze. Full amortization kicks in once the equipment is placed in service, not before.
CFP demonstrated this approach in January 2026, structuring a $40 million automation equipment financing deal for an Idaho-based cell phone casing manufacturer, closed within a tight three-week deadline. The structure matched the build schedule, so a complex automation project could close on a three-week clock without starving cash during install.
Lease vs. Loan Structures
| Structure | Ownership Treatment | Best Fit |
|---|---|---|
| Equipment loan | Borrower holds title, repays with interest | Companies planning to keep the equipment long-term |
| FMV/true lease | Lessor holds title; lessee returns or buys at fair market value | Projects where obsolescence risk is a concern |
| $1 buyout / conditional sale | Treated as owned equipment by the lessee | Ownership economics similar to a purchase |
CFP offers equipment loans, operating leases, tax leases, capital leases, FMV leases, and master lease programs. Choose the structure based on how long you plan to keep the asset, how much upgrade flexibility you need, and which tax treatment fits your books.
Financial and Tax Benefits of Financing Installation and Soft Costs
Financing soft costs instead of paying cash keeps liquidity available for payroll, raw materials, and inventory while the project ramps up. That matters most in the months before new equipment starts generating revenue.
Key financial advantages:
- Lease and loan payments, including financed soft costs, can often be treated as deductible business expenses (confirm specifics with a tax professional)
- Payment structures can be matched to your cash-flow pattern: seasonal schedules, step-up payments, or deferred-principal periods
- Avoiding a lump-sum cash outlay reduces the risk of a liquidity crunch mid-installation
Matching the payment structure to the project timeline is essential. A manufacturer ramping up a new line over eight months needs a payment schedule that doesn't demand full principal payments in month two.
How to Qualify and Get Started
Lenders financing soft-cost-inclusive projects usually require:
- Equipment quotes and vendor invoices — current within 60-90 days; older quotes often get re-priced
- Itemized soft cost breakdown — line items for freight, installation, cabling, concrete work, and training
- Financial statements — evidence you can service the financing
- Established operating history — enough time in business to support underwriting
The biggest mistake manufacturers make is waiting too long to bring financing into the conversation. Engage a financing partner during project development, alongside your EPC firm, engineers, or automation integrator, so soft costs are built into the structure from day one instead of bolted on later.
If you've already been declined elsewhere, or received financing that only covered the hard asset, CFP's Second Opinion Review™ offers a free, no-obligation re-underwriting of the full project, including the soft costs the first lender wouldn't touch.
Frequently Asked Questions
What is an example of manufacturing equipment financing?
A manufacturer purchasing a CNC machine or automation line finances the equipment cost bundled with rigging, installation, controls integration, and operator training in one financing structure instead of separate invoices.
Can installation and soft costs really be included in equipment financing?
Yes. Specialized equipment lenders like CFP routinely bundle installation, engineering, freight, and training into the financed amount. Traditional banks typically will not, since these costs have no resale value.
What is the difference between hard costs and soft costs in equipment financing?
Hard costs are the physical equipment itself — the collateral a lender could repossess and resell. Soft costs are services like installation, engineering, and training, which have no resale value once delivered.
How long are typical repayment terms for manufacturing equipment financing?
Terms vary by lender and project, typically 3–7 years based on the equipment’s useful life and project size. The right term should match how long the equipment will remain productive, not just the sticker price.
Does financing soft costs affect Section 179 tax deductions?
Financed equipment can still qualify for Section 179 if it's placed in service during the tax year, subject to annual caps. Treatment of bundled soft costs varies, so consult a tax advisor before assuming full deductibility.
What documentation is needed to finance a project that includes soft costs?
Lenders typically want an itemized cost breakdown, vendor and contractor quotes, financial statements, and a project timeline. Assemble these early to speed underwriting.
