Financing your next machine tool

Machine tools are big-ticket items, so it’s no surprise that they’re normally acquired using some sort of financing. In addition to banks, financing can be obtained from machine tool OEMs and nonbank lenders known as finance companies.

A large majority of those in the market for machine tools seek financing to purchase the equipment. But machine tool leasing is fairly common as well, because the lessor eventually takes possession of the machine, which “drives the monthly payments way down,” said Jeff Glikman, president of Intech Funding Corp., Monrovia, Calif., which offers machinery financing to manufacturers.

Leasing can also be an attractive option for those in need of a machine tool to meet the requirements of a job with specific start and end dates, according to Bill Schwanki, regional finance manager for Makino Capital Services, Mason, Ohio, the financing arm of machine tool builder Makino.

In addition, some companies prefer to lease machine tools because they serve high-tech industries that require the latest manufacturing technology. Such companies “might lease a machine tool with the intent of returning it and getting a new one every 3 years,” noted a bank executive involved in machine tool financing.

Whatever your financing preference, Glikman said now is a good time to finance a machine tool, pointing to “historically low” interest rates that lower monthly payments. Thanks to a relatively strong economy, many companies’ financial track records have improved to the point where they are finding it easy to qualify for equipment financing, he added.

For those seeking approval for machine tool financing, Glikman’s firm wants to make the application process as fast and easy as possible. “We figure that we are providing a valuable service if we take up as little of their time as possible,” he said. “So when it comes to our application and other documents, our motto is, ‘If it doesn’t fit on one sheet of paper, it’s too long.’ “

Glikman said his customers can often get approval for half a million dollars of financing by filling out a half-page credit application. “We are not asking them for tax returns, financial statements and a lot of other backup information that their banks would require,” he noted.

Some banks also offer so-called “application-only” financing. It’s a fairly prevalent practice, said the aforementioned bank executive. “But there are a lot of smaller banks that just aren’t set up for it and would never dream of doing it.”