Mining Industry Enjoys Growth Phase

Canada and The United States are posting great financial numbers and using this time and cash to further expand and upgrade operations. Analysts are bullish on the continued recovery and have a positive outlook for 2019 and beyond.

Mining is back, and it’s planning to stay for a while.

Mining companies of all sizes are seeing an upswing in their revenue and bottom-line profits. Large mining companies such as Rio Tinto, Freeport-McMoRan and Anglo-American reported solid earnings, increasing profit margins and significantly improved cash flow for FY2018. The recovery started back in 2016, has continued for the last couple years, and looks to extend well into the future. Healthy macroeconomic fundamentals, hefty reserves and recent deregulation jump started the sector from its previous slump.

Mining companies are currently profiting from nickel, lead, copper, tin and gold while traditional materials such as coal show signs of stability in North America. The current administration continues to take several actions to help save the U.S. coal industry, their attempts to “save coal” have been a positive sign for those companies that operate in the coal industry.

The mining equipment market will grow with the mining recovery.

Mining companies aren’t the only ones benefiting from the recent recovery. The positive outlook from analysts is extending to the Mining Equipment Market as well. Back in 2016, the global mining equipment market size was valued at USD 120.82 billion, but the latest analysts’ predictions estimate a CAGR of 11.7% that will boost the global mining equipment market to USD 284.93 billion by 2025 according to a recent Grand View Research report.

With such enormous growth projections, mining companies of all sizes in Canada and The United States are taking this opportunity to scale their fleets and improve their machinery to meet the upcoming demand. Mining companies are retrofitting and refurbishing their current equipment to better position themselves to increase drilling, extraction and exploration activities over the coming years. Others are purchasing new and used mining equipment across North America at a rapid pace, which is creates a huge opportunity for lenders that offer mining equipment financing.

Optimistic but careful at the same time.

It’s true that the forecast and outlook for mining in North America remains positive, but it’s important to not forget mining companies will still struggle with problems they have always faced. Issues such as tension over water usage from local communities, political unrest in countries of operation and trends away from coal and fossil fuel to alternative energy sources will always pose a threat to profits and sustained growth.

The mining industry expects to see success well into the future.

Although there are the risks mentioned above, this still doesn’t overshadow the positive trends we’ve seen and expect to see going forward for the mining industry. Analysts anticipate the trends that started back in 2016 to continue for the remainder of 2019 and well into the future.

*This article was originally posted on our Strikingly Blog here on June 1, 2019 
Read more

The Machine Tools Industry 2018

The machine tools industry received some positive news in 2017 as it was the firstyear to see positive gains in consumption. Reporting firm Statista found that consumption in 2017 was 1.6% more over the previous year. Although this seems like a small blip on the radar, with the constant ups and downs of the machine tools industry, any shift in the right direction is always celebrated.  

This is just the beginning, in fact, according to that same report, experts are predicting positive gains in consumption over the next few years which is great news for machine tool lenders and buyers in the U.S. and across the world.  

The Top Five Machine Tools Lenders 

EDA recently published its annual report on the machine tool industry analyzing the most successful lenders and buyers alike. According to their research, the top five machine tool lenders are the following:  

1.     CNC Associates Inc.                
2.     Banterra Bank            
3.     DMG Mori Seiki USA              
4.     Ellison Tech                            
5.     Hartwig Inc.                            

All five of these lenders accounted for 42.6% of the total units sold. Of all of the top 20 lenders that EDA followed, they filed a combined 481 new machine tool related financial statements in November 2017.  

Number one on this list, CNC Associates, had a great year as they accounted for 15% of the total share with 72 units sold in EDA’s report.  

Additionally, industry research firm AMT reported that October 2017 machine tool orders were up 7.6% over October 2016’s numbers.  

Who’s Buying? 

EDA also compiled a list of the top five buyers in the U.S. as follows: 

1.     Kennametal                     Pennsylvania, USA                  16
2.     TE Connectivity            Pennsylvania, USA                   9
3.     Aerofit                               California, USA                          8
4.     C&C Machine Tool     Minnesota, USA                         8
5.     FMI Holdings                Texas, USA                                    8 

Buyers come from a variety of different industries, and as we mentioned, the success of various manufacturing sectors ultimately drives the success of the machine tools financing market as well. 

Explaining the Ups and Downs 

Over the last few decades, the machine tools market has seen many changes that seem to happen for no apparent reason. Most recently, IndexBox reported that the value of the entire industry in the U.S. decreased by 4.5% from 2014 to 2015. It can seem hard to determine exactly what is hurting the machine tools industry but many have pointed to a few different ideas.  

China’s Expanding Manufacturing Sector 

Many analysts believe that China’s increasing hunger for more machine tools largely drives the market and keeps the highs higher than expected and the down periods less devastating than in decades past.  

Additionally, more manufacturing overseas, in general, has given the world manufacturing industry a boost. The primary reason that more companies are investing in production abroad can largely be contributed to the near-zero interest rates over the last decade. 

Low Interest Rates  

Low interest rates caused many U.S.-based companies to invest in production overseas where the labor is cheaper. This is detrimental to the U.S. market but provides these overseas businesses a boost in their manufacturing and in turn, their machine tools purchases.  

We can’t look into a crystal ball to predict exactly what the market will do in 2018, however with industry analysts all predicting an increase in the machine tool consumption and recent shifts in economic policy, expect 2018 to be a good year for the industry.

Read more

Where the Logging Industry is Headed in 2018

With record-breaking lumber prices and increased volatility, how will logging companies cope?   2017 was an interesting year for the logging industry to say the least. With record-breaking lumber prices expected to continue this year and for the foreseeable future, many experts are worried that the industry could end up in limbo. With that in mind, sales are still strong with industry forecasters already releasing the latest financial data from the most significant logging equipment lenders and buyers. 

Let’s take a look at the causes for this price volatility along with some predictions for the future of the logging industry in 2018.  

Increased U.S. Import Duties 

The driving force behind these record-high prices was the initiation of new U.S. import duties on Canadian lumber. Back in November of 2017, the U.S. Department of Commerce ruled that total countervailing duties (CVD) and anti-dumping duties (ADD) of 20.83% would be levied on Canada's lumber exports. This caused not only a political strain, but Canadian companies reacted by swiftly raising their prices before the new duties took effect. 

Many were concerned how this would affect the market, and experts predicted that the price difference would ultimately get passed onto the U.S. consumer. These predictions were correct, as many importers accepted the new prices and charged U.S. customers higher prices.  

It remains to be seen how this will affect the market moving forward, but many expect that U.S. producers will start to look towards European importers in hopes to boost U.S. domestic lumber production.  

A Softwood Shortage? 

If import duties stay the same, experts forecast that by the end of the decade there won’t be enough available softwood lumber in North America to meet up with U.S. demand. Luckily, U.S. housing is entering a slow period which has put the potential supply crisis at bay for a while. Even so, the new import duties on Canadian lumber hasn’t helped the situation. To correct the issue and avoid a supply gap, U.S. importers will start importing incremental supplies of lumber and logs each year to keep up. Hopefully, the higher lumber prices will boost the supply side.  

Leading Logging Equipment Lenders in 2018 

Although we’re only a few months into the year, leading industry research firm EDA has already released some financial data for financing logging equipment. According to their data from February 2018, these are the top five equipment lenders: 

·         JOHN DEERE INDL CREDIT                                 78
·         CATERPILLAR FIN SVC CORP                           46
·         DE LAGE LANDEN FIN SVC                                 25
·         WELLS FARGO VENDOR FIN SVC LLC       18 
·         STEARNS BANK                                                          15 

What equipment types were the most popular? EDA also has data on this, detailing the top ten most common logging equipment: 

EQUIPMENT TYPE                       BUYERS           UNITS

1.     LOG LOADER                                  41,547             89,621
2.     SKIDDER                                            46,872             89,598
3.     GRAPPLE SKIDDER                     24,636             60,225
4.     CHIPPER                                             36,962             58,767
5.     FELLER BUNCHER                      18,252             43,563
6.     CRAWLR DOZER LOG             20,806             38,263
7.     STUMP CUTTER                          23,829             33,041
8.     SAWMILL                                         19,883             25,644
9.     WHEEL LDR (LOG)                     11,647             23,443
10. EXCAVATOR (LOG)                    10,087             23,435 

2018 is off to a good start for equipment, with buyers from across the U.S. financing new equipment in significant numbers.  

Conclusion 

While the prices of lumber continue to rise, many experts expect that the logging equipment will continue to see positive growth into 2019. So far 2018 is showing to be promising for both buyers and equipment lenders. While ties with Canadian exporters remains volatile, experts predict that U.S. demand will heavily rely on European imports and U.S. production expansions.
Read more

The Basics of Financing Heavy Equipment

Businesses are as strong as the equipment they use to get the job done. Without reliable machinery, businesses cannot expect to finish jobs as efficiently and on time.

As you probably already know, most heavy equipment does not come cheap. For example, an average excavator costs anywhere between $100,000 and $500,000 depending on if the machine is new or used. Covering these costs can be difficult for several reasons considering most companies face cash shortages if jobs run over budget and cash flow is tied to wages, supplies and other operating expenses.

Whether you are looking to purchase new or used equipment or you opt to lease it, there is a high probability that you will want to consider financing heavy equipment to cover this huge expenditure.  

What exactly is a heavy equipment loan?

Heavy equipment loans are loans to buy or refinance heavy machinery for your business. With an equipment loan, you will own the equipment from the start of the term. Similar to a car loan, once you pay off the loan, the equipment can be used as equity to acquire other new equipment if needed for a collateral type loan.

Another scenario, at the end of the loan, you can arrange a sale leaseback agreement where you sell the equipment to the lender for cash then lease it.

Compared to most small business loans, an equipment loan can be easier to obtain given the underlying decision is based on the equipment value and your overall credit situation.

Since the equipment will be used as the primary collateral to secure the loan, you normally do not have to pledge other secondary collateral to secure financing. There can be tax benefits to owning equipment as well (consult your CPA).

How to get a heavy equipment loan or lease

- Make sure your credit profile is solid

One of the most important steps to getting a heavy equipment loan is to make sure that your personal and business credit is good. Research ahead of time and know your situation.

Got late car payments? Student loans in default? Late car payments? These things will delay or even hinder the heavy equipment loan process. Therefore, work to clean up your credit, fix any existing errors and ensure your report has no discrepancies.

- Have a solid business plan

Some lenders will look at your business plan and proforma statements to determine if you qualify for heavy equipment loan. In the business plan, describe your business extensively including the products and services. Detail the current cash flow and project a realistic yet aggressive set of goals for future growth.

Identify the socio and economic demographics of your target market and explain how your product or service will fulfill the needs of the market.

- Have cash flow statements ready

Showing the business cash coming in and going out in current terms is the best indicator to how your business is doing in the real world. Lenders consider cash flow statements when determining whether to approve a heavy equipment loan application or not.

Therefore, when applying for a loan, get your finances in order and ensure that both your business and personal financial statements are in order.  Some lenders even prefer audited or reviewed financial statements which can be well worth the expense.

We offer several heavy equipment financing programs that are designed to meet the specific need of most customers. Whether you are looking to purchase excavators for your construction business or other yellow iron, you can count on us to provide funding to acquire the equipment you need.  

Though we focus on established companies that have been in business for at least 3 years, we will also finance startups as long as they have sufficient assets to act as additional collateral for the loan. Our loan transactions range from $1 million to $55 million.

Having been in the heavy equipment finance industry for a long time ensures that our team has the experience to help you get a loan that fits your needs and is within your budget. Contact us today, let us know your requirements and we will be happy to help.

Read more