A guide to plant & machinery finance

For businesses that operate in the manufacturing, construction and agriculture industries it is essential that they have the right plant and machinery for day-to-day operations. The problem is that this type of equipment can be expensive to purchase. Plant and machinery finance will provide businesses with the opportunity to purchase these vital business assets without incurring financial burden.

Plant and machinery finance is a funding solution which has been designed specifically for businesses to purchase or lease equipment and machinery. Rather than having to pay upfront, a business can spread the payments over a specific period of time making the acquisition of assets both viable and manageable.

There are several different types of equipment which can be financed:

• Construction equipment (cranes, bulldozers, scaffolding, etc)
• Manufacturing machinery (cnc routers, industrial printers, shredders, etc)
• Agricultural equipment (tractors, harvesters, sprayers, etc)
• Commercial vehicles (delivery trucks, refrigerated vans, transit vans, etc)

Once the type of equipment has been identified a business owner will have several finance options to choose from:

• Equipment leasing allows the use of equipment for a fixed period on the provision of regular payments being made. At the end of the lease term a business can either return the equipment, renew the lease or purchase the machinery at a reduced rate. If a business does not want to commit to ownership and likes to upgrade equipment regularly then leasing is an ideal solution.
• Hire purchase enables the business to purchase equipment which they will eventually own at the end of the term and when all payments have been made. A HP agreement requires a deposit followed by monthly instalments. It is an ideal solution for a company that wants to purchase new machinery but without having large upfront payments or having a negative effect on cashflow.
• Operating lease allows equipment to be rented for a set period. As an example, if a business wins a temporary contract for 12 months and needs machinery to fulfil the contract terms then equipment can be rented through an operating lease deal. Often this lease will include a maintenance package to ensure the machinery continues to operate to its maximum efficiency.
• Asset refinance can be used when a business owns machinery or equipment. The existing asset will allow the release of capital which can be used as security for purchasing a new asset. In essence the funds released are reinvested back into the business.

There are several benefits with plant and machinery finance:

• Improved cash flow as the cost of expensive equipment is spread over a set period and cash reserves can be preserved.
• Financing will ensure equipment is kept up to date as a business can continually invest in its machinery and equipment without incurring large upfront costs. This means the business can improve efficiency productivity and competitiveness.
• The purchase of plant and machinery finance can offer tax advantages. Lease payments and interest rates on loans can be deducted as business expenses or taxable income.
• With a fixed payment programme, a company is able to plan and budget more effectively. Having this predictability helps to avoid large and unexpected costs offering a streamlined financial management process.
• Plant and machinery finance can work alongside other types of business finance solutions such as business loans, working capital loans and overdraft facilities.

If you are looking for help with applying for business finance why not refer to our guide to securing small business loans.

To summarise plant and machinery finance is an effective solution for business who are looking to invest in expensive equipment without straining cash flow.

For help with business finance, please call us on 01993 706403 or e-mail enquiries@ngifinance.co.uk.