Simon Zeilberger CFO of ENGEL decides against Pay-per-Use collaboration with banks.
Vienna, Austria – March 2023
The injection moulding machine manufacturer Engel has introduced a new payment model for its customers, Pay-per-Use (PPU). This payment method enabled by linx4 allows customers to pay according to their machine usage rate, rather than a fixed price for machine purchase. This model benefits companies most that operate in seasonal industries or need to conserve their liquidity.
Machine manufacturer Engel offers Pay-per-Use. CFO and Managing Director Zeilberger says in an interview with DerTreasurer: "Pay-per-Use is an interesting financing model. Our customers have demanded this utilization-oriented form of financing more and more, especially since the energy crisis."
Engel has been thinking about Pay-per-Use since 2020, and in cooperation with linx4, the model launched at the end of 2022. Linx4 is the enabler, so to speak, buying the machines from Engel, leasing them to Engel's customers and financing the purchase through the own machine finance funds. In this model, linx4 assumes the economic risk of underutilization and the risk of a loan default.
CFO Zeilberger also considered the offerings of banks like Deutsche Bank and Commerzbank but found that they didn't adequately map the economic risk, and as a result, the balance sheet advantage for the customer wouldn’t come into effect.
The Pay-per-Use model of linx4 works on a fixed price per unit produced or per machine runtime, with the rate determined by the residual value of the machine and the term of the contract. The IoT interface, using the online support and remote maintenance tool "E-connect.24," transmits machine usage data to linx4 in a data-encrypted form. The built-in remote maintenance tool is regularly serviced by Engel service technicians to plan maintenance work and keep plant downtimes short.
At the end of the agreed contract period, the customer has the option of buying the machine, or Engel-Used-Machinery, the used machinery company within the Engel Group, will buy the machine back from linx4. This also greatly benefits the sustainability of industrial equipment overall because a machine financed through linx4 will at least have one second lifetime.
The PPU model has clear advantages for Engel customers, including no large investments required, liquidity preservation, and better balance sheet presentation. Engel has already had its first customers use the new model since the start of the cooperation, with larger customers showing more interest in the alternative financing model currently. Engel now plans to roll out PPU internationally with linx4, beginning with Europe and eventually expanding to North America and China.
In summary, the linx4 Pay-per-Use model offers a flexible and cost-effective financing option for customers of Engel, with linx4 assuming the economic risk and the benefit of better balance sheet presentation for customers. This model benefits companies most operating in seasonal industries or those who need to conserve their liquidity. Engel is planning to roll out the model internationally with linx4, aiming to promote a sustainable circular economy in the process.
Source: https://www.dertreasurer.de/news/cash-management-zahlungsverkehr/maschinenbauer-engel-bietet-pay-per-use-an-2027301/
(Original text from DerTreasurer, translated into English by linx4)