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2017 Was a Good Year for Machine Tools – What Will 2018 Be Like?

Industry analysts reported gains in consumption in 2017 and expect an even better 2018.  Last year showed signs of improvement for the machine tools industry after years of less than stellar results. According to industry reporting firm Statista, consumption of machine tools in 2017 rose 1.6% over the previous year. The previous years, specifically between 2014 and 2015, saw negative drops in the total value of the machine tool industry as a whole.

The Unpredictable Trend of Machine Tools

There are many different contributing factors that affect the success or failure of the machine tool industry. The machine tool financers significantly depend on the different sects of the manufacturing industry to make their money and when manufacturing is down, so is the machine tool industry as a whole.

In addition, factors such as near-zero interest rates and China's continued expansion into manufacturing impact the machine tools industry significantly. Modern Machine Shop detailed the rise and falls of the machine tool industry over the last few years and notes that continued offshoring of U.S. companies to markets with lower labors costs played a big part in the decline of the machine tool industry's value.

What has kept the lows less devastating, and highs better than expected in recent years is China's continuous demand for machine tools in their manufacturing sector. That being said, with the shift towards a more business-friendly economic policy in the U.S. machine tool sales are expected to increase over the next few years.

The Most Prominent Machine Tool Financiers

In EDA’s recent annual report on the machine tool finance market, they detailed the top 20 financiers within the industry in addition to the number of sales they made. According to the report, the top 20 lenders in the segment recorded 481 financial filings for machine tool sales. EDA ranked the top five lenders as:

  • CNC ASSC INC                          72
  • BANTERRA BANK                     39
  • DMG MORI SEIKI USA             32
  • ELLISON TECH                         32
  • HARTWIG INC                          30

The number one seller made big moves in November 2017 with their numbers accounting for 15% of the total sales in the same month among the top 20 lenders.

These successful lenders also sold to successful manufacturers in the U.S. The annual EDA report also ranked the top five financers of the year:

  • Kennametal                  Pennsylvania, USA                 16
  • TE Connectivity           Pennsylvania, USA                    9
  • Aerofit                          California, USA                          8
  • C&C Machine Tool      Minnesota, USA                        8
  • FMI Holdings               Texas, USA                                 8

Representing different industries, strong showings from buyers and sellers alike give hope for the future of the machine tool industry in 2018 and years beyond. With the increasing available options for manufacturers to finance machine tools, expect to see the number of machine tool sales to continue to rise in 2018.

Experts agree as well as projections for the machine tool consumption show that the trend of upward consumption will continue for the next few years. Like we mentioned, the industry has gone through cycles of boom periods and slumps over the last few decades with a variety of factors impacting it. If experts' predictions end up coming to fruition, however, 2018 should be a booming year for the machine tool industry.

What is equipment refinancing?

Equipment and machinery used to operate a business is usually financed through a loan or a lease. Equipment financing allows businesses, which do not have cash up front, to purchase and use the equipment in the course of the business operations.

Business equipment can also be refinanced with certain lenders. Businesses have the option to refinance their equipment loans or leases in an effort to simplify or consolidate loans, reduce monthly payments by extending the term of the loan, lower interest costs, or to have access to cash that is needed to grow the business. Equipment refinancing is available to raise working capital for business which are equipment rich yet cash flow poor.

What is equipment refinancing?

Refinancing is simply financing an asset (equipment, machinery, etc.) with a new loan or lease that has a different interest rate and/or terms. Typically, it’s beneficial to refinance for a lower interest rate or an extended financing term which will lower the monthly payments. If a business has equity in the equipment, it can take out a loan and get cash now for the value of the equipment. The refinancing terms are impacted by the age of the equipment, the condition and appraised value at the time of refinancing as well as the financial condition of the company.

Refinancing equipment can also have beneficial tax impacts for the business. The monthly refinancing payments can result in a tax deduction depending on the terms. The terms of the loans should be discussed with your lender.

Sale leaseback

A sale leaseback is a form of equipment refinancing where the owner of an asset sells it to another party and leases it back from the purchaser. With a sale leaseback title actually passes to the buyer of the equipment. This is done by businesses to leverage the equipment and relieve some working capital for the business.  

Sale leaseback can also have tax impacts. Since title transfers during the sale of the equipment, the seller may need to record capital gains depending on the cost basis and fair market value. Also, the monthly payments made to the purchaser can qualify for a full tax deduction when paid.

Which businesses benefit most from equipment refinancing?

Equipment refinancing is great for businesses which are capital-intensive with expensive equipment and in need of cash. These businesses include construction companies, general contractors, dentist offices, and any other businesses that require expensive equipment to operate. For example, a construction company looking to upgrade their equipment, expand by purchasing additional equipment, or hire more employees, can refinance equipment that it already owns for additional cash.

Summary

Equipment refinancing offers business owners another way to obtain cash or lower monthly financing payments if additional working capital is needed. The lender and the owner of the asset will agree upon the terms. The terms of the refinancing can impact how the monthly payments are treated for tax purposes. When additional working capital is needed for a business, leveraging existing equipment can be a simple way to get the cash the business needs. 

All About Construction Equipment Loans

Today, the construction industry is booming. It is filled with opportunities that can lead to significant revenue. However, the journey towards big profits is usually hindered by lack of adequate cash to purchase the needed equipment to either compete in the market or cope with advancing technology.

This is where construction equipment loans come in. With these loans, you can get the desired machinery fast and easily without disturbing your cash flow or raising capital. Read on to find out if a construction equipment loan is right for your business.

Why you should apply for a construction equipment loan

Construction equipment financing is a great option to help you acquire the machinery or any other equipment your business needs. There are several advantages of construction equipment loans that make them helpful. They include:

  • They provide quick access to cash
  • The equipment purchased serves as collateral for the loan
  • They require reduced or limited paperwork
  • With on time payments, an equipment loan can help improve your credit
  • You can get a loan even with bad credit.

How construction equipment loans work

An equipment loan can be used to acquire different types of equipment but the amount of the loan you qualify for is determined by several factors including the type of equipment you are looking to purchase as well as whether it is new or used.

Similar to car loans, the equipment itself is used as collateral. This saves you from putting up additional collateral. In most cases the payments you make will be the same every month which makes it easy to plan for the expense of the new loan. 

The loan period on the other hand is determined by a couple of factors including the expected life of the equipment; a financier will not be willing to extend the loan period beyond the expected life of the equipment you purchase. 

The cost of construction equipment loans

Although you will end up paying more at the end of the loan term, you do not have to pay the entire purchase price upfront from your cash reserves. Therefore, instead of struggling to raise cash at once, you can pay every month for the term of the loan. This is much easier to handle. Also, you can have the assets on your books.

How to qualify for the loan

It is quite easy to qualify for construction equipment loans but you should go to the table well prepared, knowing what will influence your loan application. Some of the factors that determine how much you can borrow include your credit rating, financial statements, value of the equipment as well as the history of your business. Since the equipment serves as collateral for the loan you can obtain a construction equipment loan with a not so perfect credit history.

Choosing a Lender

When it comes to construction equipment loan, choosing a financing source is a critical decision to make. It is prudent to work with one who has experience in the specialty of construction equipment financing.

At Viking equipment finance, we are leaders in financing construction equipment in the USA and Canada.  We offer flexible financing solutions for a wide range of new and used machinery as well as other construction related equipment. For many years, our teams of experts have funded a wide range of customer profile needs.

When you contact us, we will guide you through various financing options and help you determine which one will suit you best. Our approval process is fast with a focus on customers that don’t fit the bank credit profile.

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Viking Equipment Finance
7001 Parkwood Blvd. Suite 3123
Plano, TX 75024
Phone: 612-642-1888
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