Securing equipment finance and machinery finance can give any business a real boost. Whether you're in manufacturing or any other industry, understanding how to finance your essential tools is a core component of successful business operations. In this article, I explain the ins and outs of asset finance for equipment and machinery.
Why Finance Equipment and Machinery?
Having the latest equipment and machinery is key to staying competitive. But buying these assets outright can be a hefty expense. That's where asset finance comes in. By financing your equipment and machinery, you can:
- Maintain cash flow and spread the cost over time
- Access better technology and have the latest equipment without a massive upfront cost
- Enjoy tax benefits that some finance options offer
- Minimise risk by reducing upfront capital expenditure, keeping more funds within your business
- Qualify for higher lending amounts in the future
- Improve company and director credit ratings.
What are the Different Types of Equipment and Machinery Finance?
There are several financing options available to suit different equipment finance needs. Here’s a rundown of the most common types:
Equipment Loans
An equipment loan allows you to borrow money specifically to purchase equipment. The equipment itself often serves as collateral.
Equipment Leasing
Leasing is a great option if you prefer not committing to ownership. You can lease the equipment for a period and at the end of the loan period, choose to return it, buy it, or continue leasing.
Hire Purchase
With hire purchase, you pay an initial deposit followed by regular installments. Once you make the final payment, ownership is transferred to you.
Chattel Mortgage
A chattel mortgage is similar to a traditional mortgage, but the loan is secured against the equipment you purchase. This option usually offers flexible repayment terms and potentially lower interest rates.
Operating Lease
An operating lease allows you to use the equipment without ownership responsibilities. The leasing company retains ownership and you simply pay for the use of the item. This is particularly useful if you need the equipment for a shorter period.
Line of Credit/Overdraft
A line of credit or overdraft gives you flexible access to funds when you need them. It acts as a revolving credit facility, allowing you to draw and repay funds up to a pre-approved limit. This can be an excellent option for managing cash flow and unexpected expenses.
Master Facility
A master facility is a pre-approved credit limit that you can use to purchase multiple assets over time without needing to seek approval for each transaction individually. This provides greater flexibility and streamlines the financing process for ongoing equipment needs.
Finding the Right Finance Option
Choosing the right finance option can be tricky. That's where I come in! As an asset finance broker, I have access to a wide range of lenders and can help you secure the best rates and most suitable finance for your business.
What asset finance brokers do:
- Provide personalised solutions based on your business goals and strategy to choose the best finance option.
- Access to tools that help you secure competitive rates and offers from lenders.
- Offer expertise around lender policies and documentation requirements.
- Anticipate and mitigate pitfalls to make the application process as smooth as possible.
Costs Involved in Machinery and Equipment Finance
In most cases, the services of an asset finance broker will be free to the business owner, with the broker receiving a commission from the lender.
However, different finance options come with different costs; for example:
- Interest rates vary based on the type of finance chosen
- Some options may have setup or monthly fees
- Protecting your financed equipment is crucial, and some packages include insurance costs.
Get the Best Machinery and Equipment Finance Advice
Financing equipment and machinery doesn’t have to be daunting. Tapping into the right advice and tools from an asset finance broker allows you to make informed decisions for your business.
Ready to take the next step? Get in touch via the form below or check out our Manufacturing Advisory Service to learn more about what we do.
