As National Machine Tool Financial’s Rick Lang sees it, the machine tool sector lies at the heart of the manufacturing world. As the machine tool sector is a core asset class for equipment finance professionals, Equipment Finance Advisor spoke with Lang to gain insight on what is driving the activity in today’s marketplace as well as his firm’s outlook for the new year.

Equipment Finance Advisor:  Rick, please give our readers an overview of your company, National Machine Tool Financial, and its history.

Rick Lang:  National Machine Tool Financial was established in 1986 with the mission of providing equipment financing, leasing and loans to both businesses and municipalities acquiring machine tools and related industrial equipment. Since that time, we have provided over $1 billion in equipment financing to more than 10,000 customers with all credit profiles -- from A through D.

Our primary niche is providing vendor financing and we work with many of the major manufacturers in private label programs. Our philosophy to our vendor partners is simple … outsource your captive financing to a company that can provide it at less cost to you and, at the same time, give your customers a better result.

As a company, we have a great deal of experience in the machine tool marketplace and we finance transportation assets and other equipment as well.

Equipment Finance Advisor: What factors would you say are driving machine tool acquisition these days?

Lang:  There are three things that are currently driving machine tool consumption today. This first is obviously replacement. The industry is quite mature and there are always customers seeking to replace older equipment with equivalent newer models. Secondly, there are those customers who are investing in the newest and most advanced technology in order to step up their productivity by automating their manufacturing processes.

The last driver in the machine tool space is the tax incentives and we saw many customers – especially in the second half of 2013 – take advantage of these incentives by investing in new equipment. For the most part, these customers are small business and are inherently averse to paying taxes. That’s the third, and I think a very important leg, of this three-legged stool.

Equipment Finance Advisor:  Does the ticket size bear any relevance in the machine tool finance marketplace?

Lang:  To begin with, l view the machine tools finance market as very competitive these days with many new players entering the market. Rates remain at historically low levels and customers are all experienced buyers.

According to Steve Kline at Gardner Publications, the most recent data shows that the average machine tool sales price was $164,000 in 2013. That means machine tool financing primarily falls in the medium- to small-ticket markets. In the large-ticket market, customers generally work with their banks in planned capital acquisition programs and for obvious reasons, those deals are less frequent.

The medium- and small-ticket machines consumed by the average shops are being used continuously and as time passes, those machines are becoming more automated and every iteration of those machines requires less and less intervention and loading time. As a result, we are seeing a great deal of equipment being sold in the small- and middle-ticket market.

Equipment Finance Advisor:  How is the aftermarket for machine tools faring these days?

Lang:  The aftermarket is doing very well and used machinery is still selling … it’s a hot property and National Machine Tool Financial is doing a lot of used equipment financing these days. Late model equipment is of very good quality so most used equipment can be used for ten years or longer. It can be sold for a second and in many cases, even a third time before it is out of productive life. So, we’re seeing a lot of activity in the aftermarket and used market.

Equipment Finance Advisor:  What is your firm’s outlook for the machine tools market going into 2014?

Lang:  Our outlook is very positive for 2014 and we are coming off of a very strong 2013. We think the positive trends in manufacturing will continue. Manufacturing is a hot buzz word in the media as well as in Washington, D.C. these days. The President and Congress keep reiterating that they are seeking ways to incentivize and encourage manufacturing in the U.S. and the machine tool sector is the heart of manufacturing. We think that there is going to be strong growth this year and going forward. That growth should continue in the aftermarket as well and there are many used machines that are ready to be put to work in 2014.

We are eagerly waiting for Congress to address the 2014 tax incentive. The most recent tax incentive saw its last sunset on December 31 last year so it’s very important for Congress to step forth and put something in for Section 179 and bonus depreciation. As a finance company, we fondly remember the days of the ITC, but I don’t think we will be getting anything that sweet again. Still, it is important that Congress makes some kind of compromise and puts something together for 2014 with regard to tax incentives.

Equipment Finance Advisor:  Could you speak to the new emerging equipment types in the machine tools sector?

Lang:  Sure. The growth of emerging technologies and manufacturing equipment like fiber-laser cutting machines, 3-D printing machines and metal injection molding machines is very exciting. These three equipment types represent the hottest styles of machines that we’re seeing these days. We see tremendous growth there and in other machine types as well … and that’s across many brands and manufacturers.

Customers in the fabricating area are all moving into fiber laser and away from traditional laser technologies. That’s a big sales cycle. In addition, customers are thinking about getting into 3-D printing for both prototyping and limited-run manufacturing. If we don’t see that happen in 2014, then it will certainly be in 2015 and it’s really going to explode.

Another emerging technology is metal injection molding along with several other technologies such as laser centering. These are similar to 3-D printing, but out of metal so that the parts are actually finished products rather than prototypes or plastic concepts. Metal injection molding and laser centering are still expensive technologies, but as the prices come down, they will be more readily adopted.

Equipment Finance Advisor:  Is there anything more you would like our readers to know?

Lang:  As I said, we think 2014 is going to be a positive year in the machine tool financing marketplace … it’s a good place to be.