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Intro to Plant and Machinery Finance
Plant and machinery finance can have many different benefits for your business. You can use it to buy new machinery or upgrade your existing equipment. The main advantage of plant and machinery finance is that it allows you to free up cash flow within your business and get new kit without harming your funds. This option means that no matter the size of your business, you can still gain access to high-quality equipment that will help your business grow.
"Plant and machinery finance can have many different benefits for your business."
What is Plant and Machinery Finance?
Plant and machinery finance is a type of loan that helps businesses buy or lease expensive equipment without dipping into cash reserves or other sources of capital. You can get the equipment your business needs without paying for it all upfront with plant and machinery finance.
"Use plant and machinery finance to buy or lease equipment for your business."
Your Plant and Machinery Finance Options
Equipment leasing (also known as plant hire or contract hire) is a popular option. It is a flexible option since you can renew the lease, hand back the equipment at the end of the lease, or buy it outright for an agreed price. You pay a fixed monthly fee for using the equipment, but you do not own it. The monthly payment will often include maintenance costs and sometimes insurance as well.
"Leasing can be a flexible way of obtaining a plant and machinery loan."
Hire purchase works like leasing, except you'll own the equipment after completing all your payments. The equipment will be an asset on your balance sheet. Any outstanding amount you owe will appear as a liability until you've paid off the debt. Hire purchase is the best option for you if you think owning the equipment will benefit your business after the contract ends.
"Hire purchase allows you to own the asset at the end of the lease."
Asset finance is another plant and machinery finance type that uses your assets as collateral. In other words, this type of financing uses existing assets as security for the loan. Asset finance is also repaid in monthly instalments over several years. If you fail to make your repayments, the bank or lender can take your asset ownership.
"Asset finance uses your assets as collateral."
Invoice financing is a type of funding that helps small businesses meet their cash flow needs. It takes unpaid invoices and converts them into liquid assets. A lender pays you the amount of the outstanding invoices and charges you a fee until you have paid the balance. A disadvantage of this route is that it can become expensive. Additionally, it puts your accounts receivables in the hands of a third party, which can sometimes feel risky.
"Invoice financing can help small businesses when they are facing cash flow problems."
A straightforward business loan can be an ideal option for buying plant and machinery equipment. Business loans can either be secured or unsecured. A secured business loan requires an asset, such as a commercial vehicle or property, that you put up as collateral for the loan. Unsecured loans do not require this. Depending on what suits you, you can shop around different firms to find who provides secured vs unsecured loans. Similarly to the above options, this option will typically offer repayment over a set period with interest.
You can apply directly with a bank or similar financial institution or use an online broker to find the best deal on offers from multiple lenders. This type of funding is mainly suited to equipment that will last for several years, helping grow your business.
"You can get a secured or unsecured business loan to help finance plant and machinery equipment."
Benefits of Using Plant and Machinery Finance
1. Get the Equipment Now and Pay Later
With a plant and machinery loan, you can improve your production capabilities. You don't have to wait until you've saved up enough money to be able to purchase the tool; you can start using it straight away.
"Get your plant and machinery equipment, pay for it later."
2. Protect Cash Flow
Receiving the equipment on finance prevents you from stressing about staff wages, bills, and other unexpected outgoings - as you are not relying solely on your profits. The business has the option to spread your repayments over a more extended period, so there's less stress on your cash flow. You can always pay off early if you like to.
"Funding plant and machinery equipment helps to protect your cash flow."
3. Access Newer Models
This type of finance provides a convenient way to replace older equipment models with newer ones without first saving up large sums of money.
"Plant and machinery finance allows you to upgrade to get access to the newest models."
4. Potential Tax Benefits
There are often potential tax benefits when financing plant and machinery, depending on several factors. These factors can include where your business is and the type of leasing you are taking on - as some tax can be reclaimed on payments.
"A plant and machinery loan can provide your business with potential tax benefits."
5. Access Latest Technology
Technological advancements allow companies to remain competitive and provide customers with the best products and services possible. Plant and machinery finance allows your business to take advantage of these advancements and enjoy everything leading-edge tech offers. This technology can help facilitate growth in ways that would not be accessible to the company without the loan.
"Plant and machinery finance gives you access to cutting-edge technology."