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Machine finance and refinance are two forms of asset funding that help businesses to grow. By investing in new machinery without paying out a lump sum of capital, or refinancing existing machinery, a company can boost business sales and profits.
Hard assets, such as plant and machinery, are expensive to buy outright, and doing so can jeopardise financial stability or limit the company’s growth potential for the future. Paying for a piece of machinery using this type of specialist funding, however, reduces the financial burden of asset investment.
Machine finance can be accessed via a hire purchase agreement or a lease arrangement. It can be suitable for a wide range of industries, including but not limited to manufacturing, engineering, agriculture, and construction.
Various eligibility factors are taken into consideration by the financier, including the applying business’ credit rating, profitability, amount of funding required, and the terms of repayment.
Machinery hire purchase
Buying a piece of machinery through a hire purchase agreement involves putting down an initial deposit followed by contractual repayments at a fixed rate. At the end of the hire purchase contract, the business may take ownership of the asset by paying a small fee.
Asset financiers offering machinery hire purchase may be flexible in terms of the deposit amount – the borrowing business might want to pay a larger deposit to reduce the monthly repayments, for example.
A machinery lease involves paying the financier fixed monthly instalments for the duration of the contract. It differs from a hire purchase agreement in that the borrowing business cannot become the owner of the asset.
At the end of the lease, the machinery can be returned to the financier. Alternatively, the lease could continue, or a new lease taken out on an upgraded piece of machinery.
The lender purchases an existing piece of machinery that the business already owns and rents it back to them over a fixed period. The business has continued use of the asset, and releasing its value in this way benefits cash flow and provides greater financial stability.
Stable cash flow and no capital outlay
Making fixed monthly repayments makes cash flow needs more predictable and budgeting easier. Business capital is also preserved.
No collateral required
The lender does not need security for the funding as they can repossess the financed asset under a hire purchase or lease agreement if the business cannot make the repayments.
Fast access to valuable assets
The business can start to use the machinery as soon as the finance agreement is in place.
The business may be able to claim capital allowances on the machinery through a hire purchase agreement. If a finance lease is chosen, repayments are tax deductible.
Obtaining finance quotes from a range of asset financiers is crucial to find the best deal for your business. We can conduct a whole-of-market search to find the most suitable machine finance or refinancing deal and apply to the lender on your behalf.
UK Business Finance are commercial finance brokers and we know the criteria of all the lenders in the UK. We offer our services free-of-charge and there is no exclusive contract to sign. Please contact our expert team for more information on how we can help you find the machine funding you need.
We work across a wide range of sectors throughout the UK, providing specialist advice to each sector.
Can I use property as security for a business loan?
Secured business loans require one or more assets to be put forward as collateral. This protects the lender from financial loss if a company cannot afford to keep up with the repayments at any stage.
Does my company have a credit score and how can I improve it?
Limited companies do have credit scores and they’re used for a similar purpose as individual credit ratings. Lenders use them as a guide to creditworthiness, but a business credit score is also useful for suppliers and investors to gain insight into your company’s financial situation.
What is bad debt and how can I protect my company?
Bad debt presents an insidious threat to the financial stability of your business. It places strain on your working capital and creates uncertainty in paying your bills, but this can be addressed successfully if you take proactive steps to protect your company.
What is the difference between open and closed bridging loans?
Bridging loans are short-term forms of secured finance that literally ‘bridge’ a gap between funds going out of a business and monies coming in.