How to finance automation investments amid uncertainty

In this conversation with an expert on finance strategy for manufacturers, learn how to create a business case for automation investments.

Financing automation project insights

• Manufacturers are reframing automation as a strategy for resilience, margin protection and operational flexibility, with the strongest cases centered on uptime, yield, scrap reduction and the ability to adapt quickly to demand swings, supply chain disruption and labor shortages.
• In a constrained capital environment, automation spending is favoring phased, modular projects with fast payback, realistic total-cost accounting and financing structures such as leasing, vendor programs and as-a-service models that preserve liquidity while supporting modernization.

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Nearly every manufacturing facility struggles with financial issues, particularly in an uncertain economy. In this Q&A, gain valuable insights on how to look at automation a little differently.

Responses are from Ann Brodette, Senior Vice President and General Manager of Industrial Equipment at Mitsubishi HC Capital America in Chicago, where she leads finance strategy for manufacturers and equipment providers across the industrial sector.

Question: How are manufacturers reframing the business case for automation investments in an uncertain economic environment?

Manufacturers aren’t framing automation as just a labor play anymore. The pitch to the board now leads with resilience, margin protection and flexibility. With input costs rising and demand hard to forecast, a machine that keeps yields consistent and gives you room to pivot earns approval faster than one that only replaces headcount. It’s a shift from “automate to cut costs” to “automate to stay operational no matter what hits us next.”

Question: What financial pressures are having the greatest effect on automation spending decisions right now, including interest rates, labor costs, inflation and demand volatility?

Interest rates have stabilized after last year’s cuts, so the cost of capital is less of a blocker than it was in 2024. What’s pressuring decisions now is input cost inflation, tariff exposure on imported equipment and materials and demand volatility. Labor costs are still a factor, but the bigger conversation is margin preservation. Manufacturers are asking whether a piece of equipment pays for itself through yield, scrap reduction and uptime, not just labor displacement.

Question: When capital is constrained, how are manufacturers prioritizing which automation projects move forward and which are delayed?

When the capital expenditure queue tightens, projects with a payback under 18 months and a clear link to margin protection move forward. Speculative or plantwide overhauls get pushed. We see manufacturers greenlighting targeted automation that fixes a known bottleneck, like an inspection station causing scrap or a packaging line short on labor. Anything requiring a multiyear rollout without interim wins gets deferred.

Question: How has the discussion around return on investment changed as manufacturers place more value on resilience, flexibility and risk reduction?

The old return on investment (ROI) model was cost of asset divided by labor saved. That’s not enough anymore. Finance teams want to see value attributed to uptime, quality, energy efficiency and the ability to pivot when supply chains or demand shift. Resilience has become a real line item. A system that lets manufacturing plants change over products in a day instead of a week has a quantifiable value that shows up in revenue and working capital and manufacturers are getting better at putting a number on that.

Question: How are manufacturers balancing short-term financial caution with the long-term need to modernize operations?

This is where financing structure matters most. Manufacturers can’t afford to freeze modernization, but they also can’t write big capital expenditure checks in this environment. The answer we’re seeing is phased investment paired with financing that spreads cost over the useful life of the asset. Leasing, vendor programs and as-a-service structures let companies keep moving forward on automation without draining liquidity they may need for other pressures.

Question: What financing approaches are becoming more common for automation projects and how are companies deciding among internal capital, leasing, outside financing or phased implementation?

Internal capital is getting protected. Most manufacturers we work with are keeping cash for working capital, tariff-related inventory moves or opportunistic acquisitions. For automation, leasing and outside equipment financing are the dominant paths. Fair market value leases work well for technology that will evolve quickly, like vision systems or artificial intelligence (AI)-enabled hardware. Capital leases are preferred for heavy, long-life cycle assets where the manufacturer wants ownership and the depreciation benefits. Phased implementation tied to milestone-based financing is also gaining traction.

Question: How are smaller and mid-sized manufacturers approaching automation financing differently than larger organizations?

Larger manufacturers have the balance sheet and engineering depth to invest in enterprise-level integration. They’re doing the data work, connecting enterprise resource planning to the floor, building out connected systems over multiyear horizons. Smaller manufacturers don’t have that runway. They’re looking for instant-on solutions: cobots, out-of-the-box vision cells, intralogistics equipment that solves a specific problem fast.

On financing, subject matter experts lean heavily on vendor programs and lease structures that let them deploy without tying up their bank line of credit. Traditional banks have gotten more cautious, so non-bank equipment finance partners are filling a real gap for mid-market manufacturers.

Question: How are workforce issues, including skilled labor shortages and training needs, affecting the financial justification for automation projects?

The skilled labor shortage has changed the automation conversation entirely. You can’t hire your way out of a production backlog anymore and that reality has made automation easier to justify financially. Projects that used to get pushback on “displacement” concerns are now framed as capacity augmentation. Training costs are a bigger line in the financial case than they used to be, because deploying a cobot or vision system only works if your technicians can program and maintain it. Smart proposals build that cost in upfront.

Question: How are supply chain disruptions and the need for operational continuity shaping capital allocation for automation?

Supply chain disruption has pulled capital allocation toward flexibility. Manufacturers that got burned by single-source dependencies are investing in automation that lets them absorb volume shifts quickly. Reshoring is a big part of this. If you’re bringing production back to the U.S., the only way the economics work is with a heavily automated facility. That’s a structural change in how capital gets deployed and it’s not slowing down.

Question: Are manufacturers becoming more interested in phased, modular or incremental investments rather than large, plantwide automation programs? If so, why?

Yes, strongly. Very few companies are writing checks for multiyear plantwide overhauls right now. The playbook is to find a specific pain point, deploy a contained automation cell, prove the ROI, then use that win to justify the next tranche. It protects cash flow, it limits operational risk and it builds credibility with the finance committee. A plant engineer who can show a 10-month payback on a pilot has a much easier time securing the next round of funding.

Question: What common mistakes do manufacturers make when building the financial case for automation under uncertain conditions?

We see a few things repeatedly. Teams build the case around the hardware cost and forget integration, training, facility modifications and software licensing. They use theoretical throughput numbers instead of realistic ones that account for changeovers and bottlenecks. They underestimate the downtime cost during installation. And they don’t budget for ongoing maintenance and cybersecurity, which can be significant on a networked system. The financial case has to be exhaustive or the chief financial officer (CFO) will pick it apart.

Question: What should plant engineers and managers understand about the hidden or indirect costs that can strengthen or weaken the case for automation?

Integration is the biggest one. Connecting new equipment to existing systems, upgrading data infrastructure and modernizing the network can rival the cost of the hardware itself. Training is another; you need dedicated time and budget to upskill the people running the equipment. Cybersecurity and insurance are increasingly material, because networked automation expands your attack surface and insurers are raising premiums on facilities without the right safeguards.

On the positive side, tax benefits like bonus depreciation can materially improve the case if the financing structure is set up properly.

Question: Looking ahead, what broader economic or industrial trends do you expect will most influence how manufacturers finance automation over the next 12 to 24 months?

A few things to watch:

• Consumption-based and as-a-service financing will keep expanding, especially for AI-heavy equipment with short obsolescence cycles.
• Vendor finance programs will become more embedded in the procurement process, with instant decisioning at the point of sale.
• Non-bank equipment finance will continue to take share from traditional banks because of speed and sector expertise.
• Manufacturers will keep pushing for flexibility in contracts, whether that’s mid-term upgrade rights, utilization-based billing or shorter terms with structured refresh options.

Question: What advice would you offer plant engineers and facility managers who need to advocate for artificial intelligence investments inside organizations that remain cautious about capital spending?

Start small and win. Pick one bottleneck with a clear, measurable ROI and build your case around a 6- to 12-month payback. Speak the CFO’s language: net present value, internal rate of return and scenarios that show conservative, expected and optimistic outcomes. Account for every cost, including the hidden ones, because a proposal that ignores training or integration gets rejected fast. If capital expenditure gets pushed back, come back with an as-a-service or lease structure that turns it into operating expenditure. And tie the investment to the risks the C-suite is already worried about, like tariffs, labor or supply chain exposure. That’s what gets projects funded.