Rising use of asset finance amongst manufacturing firms

Manufacturing firms worldwide are increasingly deploying asset finance to facilitate equipment acquisition and technology upgrade, according to the latest study from Siemens’ Financial Services Division (SFS). Conducted amongst the global top 40 industrial machinery and equipment manufacturers, the research reveals that 76% of respondents have seen increased customer demand for asset finance when acquiring manufacturing equipment over the last two years.

The study also shows that usage of financing in the last 24 months varies in different regions of the world. In Europe, the use of asset finance remained static amongst manufacturing firms, attributable to the slow business investment environment. In contrast, the proportion of manufacturing equipment sales enabled through asset finance has risen over 2% per year in the US, and remarkably by over 15% per year in Asia. The great difference in growth rates must be viewed in the light that asset finance is still in a relatively early stage of its development in Asia compared with the mature economies of the West.

Looking at the next two years, 93% of respondents expect global interest in asset finance to increase still further from their manufacturing customer base. In particular, use of asset finance is expected to grow by over 5% annually in Europe, reflecting a previously deferred need to invest as economic confidence returns. In the US and Asia, uptake of asset finance by manufacturing firms is expected to continue to grow annually by 3% and by over 14% respectively. Strong demand for manufacturing equipment finance is expected to come, above all, from China, Poland/Industrial Eastern Europe^[1] and South East Asia. The growing popularity of asset finance is likely to be fuelled by budget pressures, with 72% of respondents reporting a “squeeze” on their customers’ capital equipment budget in the last two years.

“Access to up-to-date technology is critical to a manufacturing company’s competitive position, cost-control and productivity,” commented Brian Foster, Head of Industry Finance at SFS. “By using asset finance, businesses can meet the constant demand for high-specification, tailor-made equipment in a financially sustainable way.”

Asset financing arrangements such as leasing and renting allow manufacturers to acquire the latest industrial equipment without having to tie up precious capital. Since monthly payments can be fixed for the agreed financing period, businesses’ borrowing terms are not subject to any changes in interest rates, volatility of shorter-term economics and market dynamics. With its ability to help businesses preserve working capital for tactical opportunities, asset finance is likely to gain further prominence in manufacturing industry.

^[1]Eastern European countries that have a particularly heavy concentration of manufacturing.

Methodology:

Research was conducted among the global top 40 industrial machinery and equipment manufacturers (by turnover) by telephone between May and June 2014. Respondent organisations were asked about the current and predicted use of asset finance by their customers in equipment acquisition. They were also asked to describe these trends split by region of the world, as well as to identify geographies exhibiting particularly strong growth in the use of asset finance for the acquisition of industrial equipment.

Written by Siemens Financial Services

Read the article online at: https://www.worldcement.com/special-reports/13112014/rising-use-of-asset-finance-amongst-manufacturing-firms-849/