Buy, Finance or Lease?

Schwarze-Robitec also advises on putting together the right financing package

Innovative products and modern production processes are essential for survival in global competition. If new tube bending machines are purchased, they must be perfectly tailored to the individual production requirements. However, after deciding on the right version of the right model, the investment project is still far from being completed. Last, but not least, the important question of financing and accounting for the machine immediately arises.

buy, finance or lease“The decision of whether a tube bending machine is financed from own resources, with a loan or by means of alternative financing options is not without its consequences. On the contrary: it is increasingly important for companies to consider the different effects of the various forms of financing on their liquidity and balance sheet,” reports Schwarze-Robitec Managing Director Hartmut Stöhr. For these very reasons, Schwarze-Robitec not only advises its customers on selection of the optimal tube processing machine but also supports them with international co-operation partners in putting together the appropriate financing package. “A strategic approach to capital requirements allows optimisation of the operating result, taxes and equity ratio, which therefore leads to improved credit rating figures,” Hartmut Stöhr explains.

Paying for a tube bending machine from cash reserve is, of course, always the most cost-effective solution. This particularly applies in times of constantly low interest rate levels. Instead of even losing value in the bank account in the worst-case scenario, as interest is currently below the rate of

inflation, the cash capital is used to specifically increase turnover or productivity through investment. “Unfortunately, the time of superfluous liquidity and the need to purchase a machine do not necessarily coincide,” Hartmut Stöhr must confess.

“Precisely in such cases is comprehensive advice recommended.”

Right now, bank loans are particularly interesting because of the prolonged low interest on borrowed capital. “Moreover, there are also funding programmes in many states, which further favour investment in energy-efficient and highly productive machines such as those from Schwarze-Robitec,” Stöhr adds. However, loans place a strain not only on the borrowing limits from the bank but also on the equity ratio on the balance sheet over many years. The result is a deterioration in credit rating figures, which can also have an impact on the provision of subsequent loans. “Particularly in times of increasing uncertainty in the financial world and the still long ongoing international debt discussion, positive credit ratings are becoming increasingly important,” Stöhr thinks. Alternative financing instruments may therefore be advisable in terms of the

balance sheet and fiscal aspects.

The leasing of tube bending machines, for example, is neither a strain on equity ratio nor on borrowing limits. Furthermore, the leasing rates represent fully allowable operating expenses and are therefore completely tax-deductible. “The configuration of declining leasing rates initially produces even more favourable fiscal effects than for example linear depreciation in the purchase of a machine,” Hartmut Stöhr adds. Which financing model represents the

best decision in the specific case, however, is dependent on the individual financial conditions of the company and the legal framework of the state concerned. “The consequences from the perspective of the balance sheet und fiscal policy are not universal but must rather be interpreted differently according to state law,” Managing Director Stöhr explains. “We are happy to advise our customers together with international finance specialists and to compile a customised concept.”