The Ins and Outs of Metal Fabrication

We have so much amazing material surrounding us that we take its greatness for granted. Have you ever closely examined the steel buildings that are now our churches, schools, and fire departments? Because these gigantic steel girders blend into their surroundings, they are often overlooked.

We are surrounded by objects made out of metal every day. Automobiles, buildings, sculptures – all contain metal in some form. Metal fabrication is an essential part of each person’s life. Steel and iron are reliable and a lot more secure than wood.

This article is for those of you who may not be very familiar with metal. In this article we will show you how metal is formed as well as show you the steps it takes for fabrication.

To start with, what does metal fabrication involve?

In simple terms, converting metal shapes into a finished product is known as metal fabrication. Small metal mixing bowls and giant metal cement mixing machines must all be fabricated. Metal fabrication is a category that includes metal forming, cutting, bending, welding, and finishing.

What are the different types of metal fabrication?

The three basic categories of metal fabricating are structural, industrial, and commercial. The process of manufacturing bridging and building components is known as structural fabrication. The manufacturing of processing equipment and support equipment for industrial use falls under the definition of industrial fabrication. The major chunk of metal items bought by consumers is produced by commercial metal fabrication.

What are the steps that are followed when the metal is cut?

Metal may be cut in two ways. One way is when sharp blades are rubbed up on the metal. Sometimes, though, the metal is just completely cut out. The process of applying a large amount of pressure on a small area until the metal breaks or fractures is known as shearing. It is much like a giant pair of scissors, and the process is always the same. Removal of metal, however, can be done using varying methods including abrasives, electric arc, laser beams, or torches. These are all widely used processes for cutting metal. In the field of fabrication, abrasive wheels and cutting torches predominate because they are relatively easy to use and portable. Stationary equipment (e.g. water jet beds, plasma tables, and laser cutters) aren’t used as much, yet they give amazing results with precise tolerances.

In order to get the skills required for metal fabrication, where would you go?

Certified learning centers and on the job training are the two types of metal fabrication instruction that are most common. Either way, a person must possess sufficient knowledge of the necessary skills before they can obtain work in the fabrication industry. The skills of the metal working industry are maintained and promoted by several agencies including the American Welding Society, the American Institute of Steel Construction, and the American Petroleum Institute.

Like any other field, the initial stage of metal fabrication is design, the conception of an idea that will eventually lead to the finished product. When required, engineers will check that the materials used are of the strength that is needed. The fabrication facility orders materials after receiving the plans. Depending on your design plan, materials will be cut, shaped, and welded together to make the product. Workers inspect each product before it leaves the plant to make certain it has been properly made for its purpose.

Now you know all you need to know about metal working.

Venture Leasing – A Smarter Way To Build Enterprise Value

In 2003, venture capitalists and investors dispensed over $18 billion to promising young U.S. companies, according to VentureOne and Ernst & Young Quarterly Venture Capital Report. Less documented and reported is venture leasing’s activity and volume. This form of equipment financing contributes greatly to the growth of U.S. start-ups. Yearly, specialty leasing companies pour hundreds of millions of dollars into start-ups, permitting savvy entrepreneurs to achieve the biggest ‘bang for their buck’ in financing growth. What is venture leasing and how do sophisticated entrepreneurs maximize enterprise value with this type of financing? Why is venture leasing a cheaper and smarter way to finance needed equipment when compared to venture capital? For answers, one must look closely at this relatively new and expanding form of equipment financing specifically designed for rapidly growing venture capital-backed start-ups.

The term venture leasing describes the leasing of equipment to pre-profit, start-ups funded by venture capital investors. These companies usually have negative cash flow and rely on additional equity rounds to fulfill their business plans. Venture leasing allows growing start-ups to acquire needed operating equipment while conserving expensive venture development capital. Equipment financed by venture leases usually includes essentials such as computers, laboratory equipment, test equipment, furniture, manufacturing and production equipment, and other equipment to automate the office.

Using Venture Leasing Is Smart

Venture leasing enjoys many advantages over traditional venture capital and bank financing. Financing new ventures can be a high risk business. Venture capitalists generally demand sizeable equity stakes in the companies they finance to compensate for this risk. They typically seek investment returns of at least 35% – 50% on their unsecured, non-amortizing equity investments. An IPO or other sale of their equity position within three to six years of investing offers them the best avenue to capture this return. Many venture capitalists require board representation, specific exit time frames and/or investor rights to force a ‘liquidity’ event. In comparison, venture leasing has none of these drawbacks. Venture lessors typically seek an annual return in the 14% – 20% range. These transactions usually amortize monthly in two to four years and are secured by the underlying assets. Although the risk to the venture lessor is also high, this risk is mitigated by requiring collateral and structuring a transaction that amortizes. By using venture leasing and venture capital together, the savvy entrepreneur lowers the venture’s overall capital cost, builds enterprise value faster and preserves ownership.

Venture leasing is also very flexible. By structuring a fair market value purchase or renewal option at the end of the lease, the start-up can slash monthly payments. Lower payments result in higher earnings and cash flow. Since a fair market value option is not an obligation, the lessee has a high degree of flexibility and control. The resulting reduction in payments and shift of lease expense beyond the expiry of the transaction can deliver a higher enterprise value to the savvy entrepreneur during the initial term of the lease. The higher enterprise value results from the start-up’s ability to achieve higher earnings, upon which most valuations are based.

Customers benefit more from venture leasing as compared to traditional bank financing in two ways. First, venture leases are usually only secured by the underlying equipment. Additionally, there are usually no restrictive financial covenants. Most banks, if they lend to early stage companies, require blanket liens on all of the companies’ assets. In some cases, they also require guarantees of the start-ups’ principals. More and more, sophisticated entrepreneurs recognize the stifling effects of these limitations and their impact on growth. When start-ups need additional financing and a sole lender has encumbered all company assets or required guarantees, these young companies become less attractive to other financing sources. Correcting this situation can sap the entrepreneurs’ time and energy.

How Venture Leasing Works

Generally, a major round of equity capital raised from credible investors or venture capitalists makes venture leasing viable for the early stage company. Lessors structure most transactions as master lease lines, permitting the lessee to draw down on the lines as needed throughout the year. Lease lines usually range in size from as little as $ 200,000 to well over $ 5,000,000, depending on the lessee’s need and credit strength. Terms are typically between twenty four to forty eight months, payable monthly in advance. The lessee’s credit strength, the quality and useful life of the underlying equipment, and the lessor’s anticipated ability to re-market the equipment during the lease often dictate the initial lease term. Although no lessor enters a leasing arrangement expecting to re-market the equipment prior to lease expiry, should the lessee’s business fail, the lessor must pursue this avenue of recovery to salvage the transaction. Most venture leases give lessees flexible end-of-lease options. These options generally include the ability to buy the equipment, to renew the lease at fair market value or to return the equipment to the lessor. Many lessors limit the fair market value, which also benefits the lessee. Most leases require the lessee to shoulder the important equipment obligations such as maintenance, insurance and paying required equipment taxes.

Venture lessors target lessee prospects that have good promise and that are likely to fulfill their leases. Since most start-ups rely on future equity rounds to execute their business plans, lessors devote significant attention to credit review and due diligence – evaluating the caliber of the investor group, the efficacy of the business plan and management’s background. A superior management team has usually demonstrated prior successes in the field in which the new venture is active. Additionally, management’s expertise in the key business functions — sales, marketing, R&D, production, engineering, finance — is essential. Although there are many professional venture capitalists financing new ventures, there can be a significant difference in their abilities, staying power and resources. The better venture capitalists achieve excellent results and have direct experience with the type of companies being financed. The best VCs have developed industry specialization and many have in-house specialists with direct operating experience within the industries covered. Also important to the venture lessor are the amount of capital VCs provide the start-up and the amount allocated to future funding rounds.

After determining that the management team and venture capital investors are qualified, venture lessors evaluate the start-up’s business model and the market potential. Since most venture lessors are not technology specialists – able to assess products, technology, patents, business processes and the like – they rely greatly on the thorough due diligence of experienced venture capitalists. But the experienced venture lessor does undertake an independent evaluation of the business plan and conducts careful due diligence to understand its content. Here, the lessor generally attempts to understand and concur with the business model. Questions to be answered include: Is the business model sensible? How large is the market for the prospect’s services or products? Are the income projections realistic? Is pricing of the product or service sensible? How much cash is on hand and how long will it last according to the projections? When is the next equity round needed? Are the key people needed execute the business plan in place? These and similar questions help determine whether the business model is reasonable.

Satisfied that the business model is sound, the venture lessor’s greatest concern is whether the start-up has sufficient liquidity or cash on hand to support a significant portion of the lease term. If the venture fails to raise additional capital or runs out of cash, the lessor is not likely to collect further lease payments. To mitigate this risk, most experienced venture lessors pursue start-ups with at least nine months of cash or sufficient liquid assets to service a substantial portion of their leases.

Getting the Best Deal

What determines venture lease pricing and how does a prospective lessee get the best deal? First, make sure you are comfortable with the leasing company. This relationship is usually more important than transaction pricing. With the rapid rise in venture leasing over the past decade, a handful of national leasing companies now specialize in venture leases. A good venture lessor has a lot of expertise in this market, is accustom to working with start-ups, and is prepared to help in difficult cash flow situations should the start-up stray from plan. Also, the best venture lessors deliver other value-added services – such as assisting in equipment acquisitions at better prices, trading out existing equipment, finding additional venture capital sources, working capital lines, factoring, temporary CFOs, and introductions to potential strategic partners.

Once the start-up finds a capable venture lessor, negotiating a fair and competitive lease is the next order of business. A number of factors determine venture lease pricing and terms. Important factors include: 1) the perceived credit strength of the lessee, 2) equipment quality, 3) market rates, and 4) competitive factors within the venture leasing market. Since the lease can be structured with several options, many of which influence the ultimate lease cost, start-ups should compare competing lease proposals. Lessors typically structured leases to yield 14% – 20%. By developing end-of-lease options to better accommodate lessees’ needs, lessors can shift some of this pricing to the lease’s back end in the form of a fair market value or fixed purchase or renewal option. It is not uncommon to see a three year lease structured to yield 9% – 11% annually during the initial lease term. Thereafter, the lessee can choose to return the equipment, purchase the equipment for 10% – 15% of equipment cost or to renew the lease for an additional year. If the lease is renewed, the lessor recovers an additional 10% – 15% of equipment cost. If the equipment is returned to the lessor, the start-up reduces its cost and limits the amount paid under the lease. The lessor will then remarket the equipment to achieve its 14% – 20% yield target.

Another way that leasing companies can justify slashing lease payments is to incorporate warrants to purchase stock into the transaction. Warrants give the lessor the right to buy an agreed upon quantity of ownership shares at a share price predetermined by the parties. Under a venture lease with warrant pricing, the lessor typically prices that lease several percentage points below a similar lease without warrants. The number of warrants the start-up proffers is arrived at by dividing a portion of the lease line – usually 3% to 15% of the line – by the warrant strike price. The strike price is typically the share price of the most recently completed equity round. Including a warrant option often encourages venture lessors to enter transactions with companies that are very early in development or where the equipment to be leased is of questionable quality or re-marketability.

Building a young company into an industry leader is in many ways similar to building a state-of-the art airplane or bridge. You need the right people, partners, ideas, materials and tools. Venture leasing is a useful tool for the savvy entrepreneur. When used properly, this financing tool can help early stage companies accelerate growth, squeeze the most out of their venture capital and increase enterprise value between equity rounds. Why not preserve ownership for those really doing the heavy lifting?

Why Some Trolleys and Sack Trucks Fall to Bits

Sack Truck, Trolleys and Bogies – Made in Britain?

The sack truck, bogie and trolley we know today is an import from the Far East, made from low grade under specified steels and materials, they are not of industrial quality but are still used as such. Sadly imported trolleys, sack trucks and barrows have put millions of UK workers on the dole. Now people want the industrial standard products and few are left with the core skills or knowledge to produce them.  At one time this equipment would last anything up to 10 to 12 years, today 10 to 12 weeks is a long time.  Now five million jobs later against a raft of skills so scarce they make television programs about them, Great Britain has deteriorated into Little Britain, suffocated and stifled by an internet selling unqualified mountains of unregulated tat, that provides nothing for our apprentices or future metal workers. Our steel industry is a mere shadow of its former self.

You can still buy quality but only if you know where to look but it is a dying trade.  I wonder how we got here? I was in Yorkshire a while ago and reminded myself with a trip round our industrial past how it used to be in years gone by. Properly built equipment is 50% cheaper and lasts 28 times longer that cheap imports. Imported sack trucks, trolleys, bogies and barrows are the most expensive items you can buy. We seem to know the cost of everything and the value of nothing. How could we have let it all go?

Mill Life

In between factory surveys, I try to get some exercise on my bicycle and for the Bank Holiday weekend where better, than to visit our industrial past in the heart of Yorkshire’s mill country.  We arrived at Oxenhope in time for the midday train and stepped into a bygone era, only saved 40 years ago by the Friends of the Keighley and Worth Valley Railways who have restored the line, now famous for its stage set of the Railway Children.  We also visited Saltaire.  In keeping with a number of mill sites this was a small town built to accommodate the staff and workers of the Saltaire Mill.  These amazing structures survive largely due to the goodwill of their benefactors and their historical importance of an era long since gone.

I can remember in the 70′s these mills working and men handling quarter ton botany bales, taking its name from the wool in the bale which in the early days of Saltaire linked to a wool sorting operation, must have been a living hell of disease, not least of all from Anthrax spores housed in the wool.  Quite apart from the workers living practically in their own excrement, disease and danger was the inspiration for improved factory conditions and the reason for total business communities like Saltaire coming into existence.

The subject of television programs

The canals and railways are particularly important to my family as we have our engineering routes inextricably buried deep into the industrial revolution.  The harnessing of steam power and the means of fuelling it revolutionised from the Worsley Bridgewater Canal Mines transformed our abilities to manufacture the base materials we needed to feed and clothe ourselves.  A simple supper with a bottle of wine, all the cutlery and plates and cooking facilities from scratch would require trillions of pounds to put on any table today from a standing start, even the clothes you wear represent breathtaking sums of investment.  At the time of the Industrial Revolution not only could you not have afforded to buy them, you would have had to wait over a hundred years to take delivery of them.  The revolution in clothing alone is partly responsible for our ability to conquer the Arctic and the mountain tops of the Himalayas.   In other words the success of generations of time and money invested into the infrastructure we have today is still very delicately balanced and reliant on quality and trust like never before.  One hung Parliament and a volcano is all you need to upset the delicate balance!

One of the wheels on a steam locomotive bogie could be measured in tonnes.  You can feel the ground move under its weight.  Fully laden I would estimate this steam locomotive would have weighed in at a hefty 60 to 70 tonnes which means bridge building is a serious pastime.  Add to this dynamic loadings and you have got yourself an engineer’s mathematical paradise.

They don’t make ‘em like that these days

The old railway station sack barrow and the humble bogie was made with great love and precision, wrought iron and the blacksmith’s hammer have fashioned its distinctive shape.  The powerful solid inch diameter axle on to which is mounted its cast iron wheels, all fitted to a beech or oak framework, denotes these sack barrows as the workhorses of their time.  The angle at which they sit is precisely balanced to enable it to effortlessly rotate its load (in excess of 500 kgs sometimes) in perfect balance on to the very precise fit of the bearings on to the axle.  It is with some horror that I see £12.00 sack barrows from China with a life expectancy of 9 months mounted to half inch axles of inferior steel to which wheels are offered because the word ‘fitted’ is totally inappropriate, they don’t.  The clearances between these and the precision with which I was trained is the difference between the entrance to Dartford Tunnel through which a bus could easily pass.  Equipment I manufactured in the 70′s is still in use today, including wooden sack barrows and traditional carts which we still supply on precision axles and fit for many industrial applications.  This makes our Chinese ‘cheapies’ nearly three times more expensive because you would have to buy 28 of them for the same life span and even then they do not take half the weight the suppliers think they can, that is because the entire weight should be taken on one wheel with a 50% safety factor.  This rule has simply been forgotten but it is lovely to look at the build quality of these old handling systems and the metal in the train wheels which work faultlessly thousands and thousands of times.

So as we left Haworth Station I reflected on a bygone era whose foundations are still providing the corner stones of our modern economy. The same railway lines prepared and started over a hundred years ago are still functioning with the same bridges, the principles of the bogie and steering arrangements on tracks are still very much in use today as are the foundries and methods that created many of them, although the foundry businesses that created them have long since gone.  However bogie wheels on tracks and the metals used are still very much in evidence in our crane systems and material handling equipment so my little trip out to the industrial past of Yorkshire meant a lot to me taking in the canals, railways and mills which are still there thankfully to be enjoyed.  All we have to do is to keep them in good order of which the Rochdale Canal is a fine example of restoration with one of the deepest locks, if not the deepest lock, in the country – a far cry from the days when it used to catch fire due to the high levels of pollution.

As I said farewell to Oxenhope at the end of the line, I reflected on the Railway Children’s final scene containing the famous line ‘Daddy, My Daddy’ uttered by Bobbie played by Jenny Agutter to Michael Kitchen who plays Daddy.  However it is the face of Richard Attenborough who played the old, influential gentleman that really sticks in my mind and when I think of places like Saltaire and the real improvements that we have seen over the years and throughout our nation since those dark years of the industrial revolution.  It is this sort of person and character who has influenced the real changes in our lives.