Asset finance grows in importance for machine tools industry

Asset finance is increasingly important in enabling machine tools investments, according to the SFS study conducted among the global top 80 machine tools original equipment manufacturers (OEMs). The vast majority (84%) of respondents reported that their customers were finding it more difficult to access traditional bank loans to fund equipment acquisition. More than 60% of the OEMs had witnessed rising demand for financing options from their customers over the last two years. Non-bank finance had become increasingly relevant in facilitating equipment sales and technology upgrades. Around two thirds (64%) of the OEMs confirmed that asset finance has been "highly important" in enabling their customers to acquire equipment. Demand for asset financing is expected to grow through to the end of the decade, with 68% of respondents suggesting that it will continue to be highly important in the next five years. Leasing was highlighted by 55% of OEMs as the principal funding source used by machine tools users. In the UK, there was a drop in machine tool consumption in 2012 compared to 2007, an aftermath effect of the global economic slowdown between 2008 and 2011. SFS said: "Access to affordable and appropriate finance therefore now plays a crucial role in reviving up-to-date machine tools equipment investment in order to respond to the green shoots of economic revival and increased demand. "This is especially important since many machine tools users are small and medium-sized enterprises who often experience difficulty accessing traditional bank loans for equipment acquisition. These companies are often specialist component manufacturers anchored in the supply chains of high value-added manufacturing such as vehicles, aircraft, machinery and medical devices." Brian Foster, head of industry at SFS, added: "The recession has seen many machine tool users 'sweating' their outdated equipment assets because of a lack of funding for new investments. However, they need to upgrade to more productive, more energy-efficient alternatives if they are to remain competitive in the long run. "OEMs who are able to help customers overcome their financial bottleneck by providing an integrated asset financing or leasing facility will secure themselves a distinct competitive advantage."