Rental stimulation!

Date: 11 November 2009

Mills CNC’s ‘SMART Options’ rental scheme is just the job for precision manufacturers looking to increase (and improve) their machine tool capacity without being tied to any long-term purchasing commitment.

Mills CNC, the exclusive distributor of Doosan machine tools in the UK and Ireland has reported that its recently-launched 'SMART Options' machine tool rental scheme, available on all new Doosan machines, has proved popular with precision manufacturers.

The 'SMART Options' rental scheme, administered and managed by Mills CNC Finance, the independently operated machine tool finance arm of Mills CNC, was launched in July 2009 and has (to date) seen eight UK and Irish companies take-out rental agreements on new Doosan machines.

Says Mills CNC Finance Manager, Ian Barber:

'The majority of our 'SMART Options' business has been with SME's. In all cases our rental scheme has helped these companies manage to square, what for them was a difficult but not atypical circle.'

Continues Ian Barber;

'A significant number of precision manufacturers are busy. They are working flat-out and their order books, at least in the short-to-medium term, are healthy.

'To help cope with this work many of these companies ideally would like to invest in a new Doosan machine tool as a route to increasing their manufacturing capacity and capability, enabling them to complete manufacturing contracts more quickly and efficiently....and certainly more profitably.'

There are however a number of problems that manufacturers face.

The first of these is with the manufacturers themselves and the prevailing lack of confidence that, despite a gradual upturn, is still evident in some manufacturing sectors.

'Some companies' says Ian Barber 'are reluctant, at this moment in time, to saddle themselves with what they consider to be long-term financial commitments (i.e. investing in a new machine tool via a bank loan or via a traditional Hire Purchase or Operating Lease arrangement.

'They are (rightly concerned) by the high interest rates that banks currently charge (typically 6.0 to 6.5%) despite the low bank base rate of 0.5%.

'And, because there is still some uncertainty in the market, with new manufacturing contracts taking longer to come to fruition - manufacturers err on the side of caution and shelve their investment plans in favour of 'making do' with the technology they already have to hand.'

It was against this backdrop that Mills' 'SMART Options' rental scheme was designed and launched.

The Scheme has a number of elements.

The first of these is that the rental of a new Doosan machine must be for 12 months, in the first instance. But towards the end of the 12 month period manufacturers have a choice to make.

1. Return the Doosan machine tool to Mills CNC;
2. Extend the rental period for a further 12 months;
3. Buy the machine and get 100% of the rental payments already made refunded against the original price of the machine.

Continues Ian Barber:

'The 'SMART Options' rental scheme gives manufacturers much needed breathing space to be able to focus and improve their performance in the short-term without being distracted by what may or may not happen in the future.'

'SMART Option' rental payments are highly-competitive - just £30.00 (monthly repayment) per £1000.00, and such low payments combined with the Scheme's 'No deposit required' condition, and machine tool delivery, installation and training included in the price - has generated significant interest amongst manufacturers.

One such company that has taken advantage of the SMART Options Scheme is Dartford-based leading precision subcontractor, Kenard Engineering Co Ltd., who acquired a Doosan HP 5100 horizontal machining centre (in September 09) via the Mills rental scheme.

Says Matt Cornford, Operations Director at Kenard:

'We needed additional milling machine tool capacity quickly to help us fulfil a short-term (8 month) manufacturing contract that we had won.

'However, as the contract was finite, we didn't want to be tied to any long-term financial commitments which would have been the case if we had decided to purchase a new machine tool.

'Instead we decided to rent a new Doosan horizontal (the HP 5100) via Mills' SMART Options Scheme, which gives us the flexibility to hand back the machine to Mills if the short-term contract is not renewed - or to either continue with the rental arrangement for a further 12 months, or buy the machine outright depending on what our manufacturing requirements are further down the line.

'SMART Options gave us instant access to a high-performance machine and, once the rental agreement was signed with Mills, the new HP 5100 machine was installed at our Tewkesbury facility in days.'

Mills' 'SMART Options' Scheme is just one example of how Mills CNC is helping its customers maintain their competitive advantage through the acquisition of new, high-performance Doosan machine tools.

Says Ian Barber:

'We work closely with customers and get to know and understand the key drivers in their business. By doing this we are able to take a more holistic view to machine tool finance and funding arrangements, and are able to devise a number of innovative solutions for customers.'

'So for example, we can work with and help customers consolidate existing finance agreements by say extending the terms of a pre-existing arrangement and, as a consequence, reduce a customer's monthly outgoings.

'We also work with customers to free-up equity capital that they may have tied up in their existing machine tools. By doing this we can help them find the deposit for a new machine tool or help them re-structure their existing financial arrangements so that cash flow and access to working capital is not adversely affected.'

Mills CNC Finance is not tied to any particular lender so customers can access a broad range of funding/finance packages and deals that are on the market.

Such independence enables Mills CNC Finance to offer extremely flexible terms that can include:

. Low start options
. Holiday periods
. No or low deposit options
. VAT deferments

Concludes Ian Barber:

'The current economic conditions dictate that machine tool manufacturers need to help customers access the best and most appropriate funding and finance arrangements.

'At Mills CNC Finance we are constantly developing and shaping the portfolio of products and services we provide...and the recently-launched SMART Options rental scheme is just one example of what we're all about.'