CNC Business Feasibility Calculator
Machining ventures rarely fail on the interest rate. They fail on how many hours the machine actually sells. This works out the utilisation you need before the project covers its EMI and overheads, and whether it survives a realistic first year.
What you are putting in
Capacity and how much of it you will sell
Utilisation is the share of available spindle hours you actually bill for. It is the assumption most first-time projects get wrong, and it is what a credit officer will test hardest.
Rate, running cost and overheads
Default figures are illustrative only. Power tariffs, machine hour rates and consumable costs vary widely by state, machine class and the work you take on. Use your own quotes.
You need to bill 216 hours a month just to cover everything including the EMI. At the 60% you have assumed, the project clears that with a surplus of Rs.29,767 a month.
Revenue against total cost, by utilisation
Where the two lines cross is your break-even. Everything to the left of it is a loss-making month.
KarobarUdhar Insider Tip
Projects like this fail on utilisation, not on the interest rate. A first-time job shop that budgets for 70 or 80 percent spindle utilisation in year one is almost always wrong, because the machine sits idle while you find customers, and finding customers takes longer than commissioning the machine. A credit officer who has funded this sector before will push hardest on exactly this number. Model 40 to 50 percent for the first year and see whether the project still works. If it only works at 75 percent, it does not work.
KarobarUdhar Insider Tip
Two costs are routinely left out of these projections and both are large. Tooling and fixtures are not a one-time purchase, they are a running replacement cost, and on the figures above you are already spending Rs.46,675 a month on consumables and power alone. Second, the working capital gap: you will pay for material and wages weeks before the customer pays you. Financing the machine and forgetting the working capital is the most common reason a technically sound job shop runs out of cash in month four. Work out the gap properly before you finalise the loan amount.
Indicative only. All default values are illustrative and should be replaced with your own quotations. Payback is measured on cash surplus before EMI, since loan repayment is a financing choice rather than a project return. Depreciation is shown at 15 percent written down value on plant and machinery, which is the common treatment but should be confirmed with your accountant. GST input credit on the machine purchase is not modelled here and will improve the picture where you are registered and the credit is available.
The number that decides it
A CNC project proposal usually arrives at a bank built around a machine quotation, an interest rate and a revenue figure. The revenue figure is the one nobody interrogates, and it is almost always the product of an assumed utilisation that has been chosen to make the file work rather than derived from anything.
Break-even utilisation reverses that. Instead of asking what you earn if the machine runs at seventy percent, it asks how much of your capacity has to sell before you stop losing money. That is a number you can hold against your actual enquiry pipeline, your actual customer conversations and the actual order book you have in hand rather than in prospect.
Two costs move it more than anything else, and both are commonly understated. Consumables and tooling are a running replacement cost rather than a one-time purchase. And the working capital gap between paying for material and wages and being paid by the customer is real money that has to be funded from somewhere. A technically sound job shop that financed the machine and forgot the working capital runs out of cash in month four, and it is a failure mode we have seen repeatedly from the lending side.
How to use it
- Use your actual quotations. Machine, tooling, installation and power connection. Every default figure in this calculator is illustrative and will be wrong for your project.
- Be honest about available hours. Shifts, hours and working days give your capacity ceiling. Utilisation is the share of that ceiling you will actually bill for.
- Test the project at 40 to 50 percent. If it only works above 70 percent, it does not work. Set utilisation low first and see what survives.
- Read the break-even, not the surplus. The surplus tells you what happens if your assumption is right. The break-even tells you how much has to go right before you stop losing money.
Common questions
What machine utilisation should I assume in year one?
Between 40 and 50 percent is realistic for a first-time job shop, and lower in the opening months. The machine sits idle while you build a customer base, and building a customer base takes considerably longer than commissioning the machine. A projection built on 70 or 80 percent utilisation in year one is the single most common reason these proposals are declined, and the reason plenty of approved ones run into trouble anyway.
Why does the calculator show break-even utilisation rather than just profit?
Because utilisation is the assumption you control least and get wrong most often. Profit at an assumed utilisation tells you what happens if your assumption holds. Break-even tells you how much of your capacity has to sell before you lose money, which is the number to test your sales pipeline against. If the project only works above 70 percent, it does not work.
How much margin money will a lender want on a machinery loan?
Commonly 25 to 30 percent of the asset cost, though it varies with the machine class, whether it is new or used, and how liquid the resale market for that asset is. Used imported machinery attracts a higher margin because recovery value is harder to establish. Include tooling, installation and power connection in your project cost, since lenders will fund those at a different rate or not at all.
Should I include working capital in the loan?
You need to fund it somehow. You will pay for raw material, power and wages weeks before your customer pays you, and a job shop that finances the machine while overlooking the working capital gap runs out of cash somewhere around month four. Whether it comes as a separate cash credit limit or as part of the term loan, work out the number properly first.
Is depreciation included in the payback calculation?
No. Payback here is measured on cash surplus before EMI, because depreciation is a book charge rather than a payment and loan repayment is a financing decision rather than a project return. Depreciation is shown separately because lenders add it back when computing debt service coverage, which is where it genuinely matters to your application.