Machine tool financing

August 25, 2015 2:57 pm

Right financing solutions play a critical role for machine tool buyers to get an added advantage in today’s competitive market
 Machine tool industry is cruising through a challenging phase and finance remains the key problematic component for the machine tool buyers. It has been observed that potential machine tool buyers are experiencing increased difficulty arranging loans to fund equipment acquisition.
Commenting on the availability of finance for Indian machine tool buyers, Vikas Taneja, Vice President – Marketing, Jyoti CNC Automation Ltd. says, “Looking at the present market situation, it is somewhat difficult for machine tool buyers for arranging finance. As machine tool is capital goods business, finances required are sometimes very high. Therefore, finance availability is a challenge for machine tool buyers in India.” Jyoti CNC is a major CNC machine tool manufacturer in India.
Sanjeev Goel, Managing Director at Intec Capital Limited observes, “Financing has always been the biggest challenge for the SMEs in India. Lack of availability of timely and adequate funds, extensive documentation, non- availability of finance to first generation entrepreneurs, and difficulty in credit assessment has been continuously adding to their woes.” Intec Capital Limited is one of the leading non-banking financial institutions in India commenced its operations in 1994.
Mr Goel adds, “Inherent problems of small enterprises such as lack of transparency and nonadherence to accounting norms, act as deterrents for institutions in financing them. The perception of high risk associated with lending to SMEs has forced financial institutions to embark upon a collateralised lending policy, and this acts as another major hurdle in accessing of funds. Though the flow of credit to SMEs has recently increased, the gap between demand and supply still remains wide. Even for machine tool buyer, the challenge remains the same as mentioned.”V.A. Mohankumar, Assistant General Manager, Bank Of India, Chennai points out availability of finance is a challenge, “If a buyer is not having a clear proposal of as to how the debt will be serviced and paid back in reasonable time frame.”
However, Mr Mohankumar feels there will be no challenge in finance if the buyer is having a clear roadmap of how the finance would be utilised and how the proposed machinery would be put in to maximum use and increase the productivity.
Ankur Agarwal, Marketing Manager at DMG MORI shares his optimism on finance availability saying, “Today, finance is readily available to the machine tool buyers. The outlook looks very positive and with ‘Make in India’ wave. The manufacturing industry is all set to grow rapidly in the coming years. The finance industry doesn’t want to miss this opportunity. There are numerous private sector players and public sector players who are ready to finance the buyers. Various government schemes for SMEs are also helping in this regard.”
Finance optionsToday there are many finance options available to fund equipment acquisition. These include a loan, capital lease, finance lease, operating lease, off-balance sheet lease, tax lease, non-tax lease, promissory note or security agreement, skip payments, step-up or step-down payments etc.
“One can approach nationalised banks, private banks, cooperatives or NBFCs to avail loans for equipment acquisition. The government has also undertaken various measures to support SME access to finance,” Mr Goel suggests. “SMEs can reach out to NABARD and SIDBI for availing schemes like Credit Guarantee Trust for micro and small enterprises and Credit-linked Capital Subsidy Scheme.” Companies like Intec Capital are focussed into financing of machinery and equipment to be bought by small and medium enterprises.
“Rate of interest might differ between various options. However, ease of financing, paper work and time involved also play a major role in selecting the right financer,” Mr Agarwal views.
Helping handsMachine tool players as well as the finance institutions have different strategies to deal with potential machine tool buyers who are in need of finance. Explaining the strategies at Intec Capital, Mr Goel says, “We have been very consultative in approach while dealing with potential machine tool buyers looking for financial assistance. We analyse the current financial position of perspective customers and help them in identifying the right mix of capital for meeting various business expenditures. We also help them in compilation of all the necessary documents required for availing any of the loans. As we are one of the few NBFCs who finance both new as well as used machines, we help customers evaluate both the options and make the best decision.”
Intec also provides a dedicated relationship manager for all prospective buyers who assist them in identification of machines to financing of the machines. “Post disbursements of loan, our in-house customer support centre works meticulously to make the association a delightful experience,” Mr Goel assures.   

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