Rising Use of Asset Finance Seen among Manufacturing Firms for Equipment Acquisition

Manufacturing firms worldwide are increasingly deploying asset finance to facilitate equipment acquisition and technology upgrades, according to the latest study from Siemens’ Financial Services Division (SFS). The recent study, conducted among the global top 40 industrial machinery and equipment manufacturers, including the U.S., 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 the U.S., the proportion of manufacturing equipment sales enabled through asset finance has risen over 2% per year, compared to over 15% per year in Asia. The great difference in growth rates must be viewed in light of the fact that asset finance is still in a relatively early stage of its development in Asia, compared with the mature economies of the West. In Europe, the use of asset finance remained static among manufacturing firms, attributable to the slow business investment environment.

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 the U.S., uptake of asset finance by manufacturing firms is expected to grow by over 3% per year. In Europe and Asia, use of asset finance is predicted to grow annually by over 5% and over 14% respectively. Strong demand for manufacturing equipment finance is expected to come, above all, from China, Poland/Industrial Eastern Europe¹ and Southeast 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.

“The competitiveness of a manufacturing company is hugely underpinned by the use of sophisticated technology,” commented Gary Amos, head of Commercial Finance Americas, Siemens Financial Services, Inc. “With the help of asset finance, manufacturers can gain access to up-to-date equipment to improve efficiency, productivity and cost-control 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.

Methodology:

Research was conducted among the global top 40 industrial machinery and equipment manufacturers (by turnover) by telephone between May and June 2014. Respondent organizations 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.

This press release and full report is available at:

http://finance.siemens.com/financialservices/us/news_press/press_releases/pages/assetfinancerising-whitepaper-commercialfinance.aspx

For further information on Siemens Financial Services, please visit: www.usa.siemens.com/finance

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Siemens AG (Berlin and Munich) is a global powerhouse in electronics and electrical engineering, operating in the fields of industry, energy and healthcare as well as providing infrastructure solutions, primarily for cities and metropolitan areas. For over 165 years, Siemens has stood for technological excellence, innovation, quality, reliability and internationality. The company is one of the world’s largest providers of environmental technologies. Around 43 percent of its total revenue stems from green products and solutions. In fiscal 2013, which ended on September 30, 2013, revenue from continuing operations totaled €74.4 billion and income from continuing operations €4.2 billion. At the end of September 2013, Siemens had around 362,000 employees worldwide on the basis of continuing operations. Further information is available on the Internet at: www.siemens.com.

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