What is Machinery Finance?

On this page:

Intro to Machinery Finance

What Types of Machinery Finance are Available?

- Hire Purchase Agreement

- Operating Lease

- Finance Lease Agreement

- Refinancing

What Is the Eligibility Criteria for Machinery Finance?

Benefits of Machinery Finance

Intro to Machinery Finance

Do you own a business that requires the use of machinery? It can be challenging to know how to fund these assets, especially when dealing with unexpected breakdowns or repair costs.

Luckily, several machine finance options prevent you from paying a large sum of capital upfront.

This blog post discusses everything you need to know about machinery funding, including the different types and eligibility criteria.

Machine finance can be used to fund a wide range of assets.

Machinery finance – otherwise known as equipment or asset finance – allows you to fund the plant or machinery that your business requires. 

Machinery finance can be used to fund:

• Manufacturing machinery

• Specialist assets

• Cars and trucks

• Office machinery and supplies

• Construction machinery and equipment

• Agricultural machinery

• Machinery handling equipment

• Technology

• Medical and scientific equipment

You can use this finance if you decide to grow your business and need to cover the cost of new technologies or equipment that will help you scale upwards. Alternatively, you can use machine finance to take care of any machinery default repairs or replacements.

With machine finance, you can source amounts between £1,000 to a maximum of £20,000,000 depending on your needs and your lender.

Agricultural equipment is an example of assets that can be financed with machine finance.

What Types of Machine Financing Are Available?

There are many forms of machinery loan for you to choose from, such as:

Hire Purchase Agreement

A hire purchase machinery allows the machine provider to retain ownership of the asset and spread finance repayment over an agreed period. After this lease is over, you have the option to purchase the machine or asset outright. You may decide to make a larger initial payment followed by smaller payments on a fixed-term basis.

Through hire purchase, you have the option to buy the machinery at the end of the contract.

Operating Lease

Similar to finance leasing, operating leases are used for more specialist equipment or machinery that you may only need for a particular duration of the asset's life and have no interest in buying permanently.

Operating leases allow you to rent an asset over a short or medium period. To determine rental costs, you can subtract the residual value from the original purchasing price. This means costs vary depending on the time the asset is required.

Operating leasing allows you to rent machinery over a sustained period.

Finance Lease Agreement

Finance lease agreements allow you to use assets without paying for them upfront. You never own the asset as there's no option to purchase it outright. Instead, you pay according to a pre-arranged flexible period agreed on with the lender. You can continue to hire the machine once the lease has finished or return the asset to the provider. The lease usually lasts as long as it takes for the lender to recoup the asset's price.

With finance lease agreements, you don't have the option to purchase the machinery outright.

Refinancing

Refinancing allows you to resale the value of an asset you already own. This makes it easier to fund new machinery. Refinancing works as the lender purchases the machinery and refinances it through a repayment scheme.

The lender purchases machinery and refinances through a payment scheme.

What Is the Eligibility Criteria for Machinery Finance?

Machine finance eligibility criteria vary from lender to lender. However, almost all lenders will consider your:

• Business credit rating

• Desired repayment terms

• Requested amount to borrow

• Trading period

• Business profitability

These factors allow lenders to determine the risk involved in lending you machinery. For instance, it helps them examine whether you can repay the loan based on your current financial situation.

Make sure you have a complete picture of your finances, including any debts or funds owed, to aid these discussions.

It's important to note that the lender will charge you a higher interest rate if you get machinery finance on a high-risk profile. 

Machinery finance can be subject to a variety of different checks.

Benefits of Machinery Finance

There are several benefits to machining financing, including:

• You have access to hire-to-purchase options

• You get immediate access to the machinery you need.

• You can plan your budget around your fixed payment schedule.

• It doesn't require any capital to be secured against the loan

• You can retain a stable cash flow

There are a wide range of benefits to machinery finance.

Are you interested in a machinery finance loan? Love Finance provides asset finance for small, medium, and large businesses online. Get a quote using our straightforward, automated process today. 

More Examples of Machinery Finance:

Business machine leasing

Machining finance

Leasing machinery

Machine hire purchase