New Credit Game for Industrial Equipment

By Lloyd Graff

I think we got an important signal Tuesday when Bank of America decided not to raise credit lines for McDonalds franchisees to buy new equipment such as coffee machines. They’re keeping credit lines as they are – that doesn’t mean they’re cutting them, it just means they’re not raising them as a general policy. This is important because it shows that the Wall Street mess is starting to filter down to the lending habits of major banks.

I think this is going to affect industrial equipment purchases because it affects the money available to borrow. It’s going to mean that distributors and machine tool builders are going to have to become more resourceful in enabling their customers to buy new and used equipment. A Haas or an Okuma is going to have to be more involved in the financing issues of their customers, using their clout with lenders to find money for them. They will probably be paying more for the money than in the past, but I think this is part of what the FED is all about in providing ample liquidity in the system. The sources for the money may not be the traditional ones that people have used in the past. There will be leasing money, off-shore money and bank money available, but the banks will probably be lenders who fall to the sidelines, because the more resourceful and nimble lenders will probably be the ones to step in.

Question: Have you had a problem in buying equipment recently?