Manufacturing Equipment -- Too Shy to Buy?

IndustryWeek (8/19, Alpern) – It's a buyer's market for capital equipment, but with the economy's future still uncertain and banks ever cautious, companies proceed with caution…Part of this reflects the global economy. The landscape for financing of new equipment has changed dramatically in recent years, forcing buyers to seek loans from a banking sector that has consolidated significantly and is far more cautious in its lending habits. But Fredon's owner, Roger Sustar, won't go near the market today. "Hell no," says Sustar. "I'd like to buy right now, but I'm scared." According to Sustar, loans rates have changed significantly. Once, manufacturers had been able to finance new purchases at prime rates, often well below 3.25%. Now, banks customarily offer the London Inter Bank Offering Rate (LIBOR), which currently sits at 5.5%.

But that rate can vary, and does, frequently. "That changes things tremendously for small businesses," says Sustar. While manufacturer bankruptcies and equipment repossessions might be increasing, other signs suggest glimmers of hope for manufacturing, and these signals might indicate more capital equipment investment is on the horizon. According to William Gaskin, president of the Precision Metalforming Association, as factories and facilities -- especially those in the automotive industry - begin restarting operations, it will increase the need for more sophisticated equipment.