What is Manufacturing and Production Equipment Finance?
The manufacturing sector is a key part of the UK economy, but it operates under significant financial pressure. Manufacturing and production equipment finance is one way for companies to relieve that pressure, spreading the cost of essential but expensive equipment.
How Does Manufacturing and Production Equipment Finance Work?
Here’s a quick overview:
Term and Repayment:
Manufacturing equipment finance makes large outlays manageable. You’ll make monthly repayments over a period of up to five years. Payments include interest and VAT and are not affected by inflation or interest rises. If your situation improves, you may be able to pay off the loan amount early, but lenders often impose a penalty for this.
Lender Requirements:
When you apply for funding, the lender will carry out the standard credit and security checks and ask you for proof of your company’s finances. This may include major customer agreements, a cash flow forecast and balance sheet, plus accounts and income statements over a certain period.
What kind of equipment leases are available?
Let’s say you want to fund the purchase of a new welding machine. You will have three main options:
Hire Purchase:
With Hire Purchase, the lender buys the welding machine and offers you a monthly repayment plan to pay off the cost of the purchase, plus interest. Once all the payments have been made, the machine is yours – you just have to pay a nominal fee to take ownership.
Operating Lease:
With an Operating Lease, the lender also buys the welding machine, but your monthly payments don’t count towards ownership. Instead, you pay to keep and use the machine for the duration of the agreement. Once that time is up, you can choose to extend the lease, return the machine to the lender, or sell it and keep a percentage of the proceeds.
Finance Lease:
A Finance Lease is based on the welding machine’s predicted residual value, as assessed by the lender. Your monthly payments will usually be a bit lower, and the lender will sell the machine at the end of the lease to recoup the remaining expense. At this point you can end the arrangement, rent a replacement or upgrade to a different model.
Do you already have a lot of equity tied up in costly manufacturing equipment? Many lenders offer equipment refinancing. This allows you to release some of the cash value of the equipment by selling it to the lender, who then leases it back to you.
Who can benefit from manufacturing and equipment finance?
Manufacturing equipment leases are suitable for businesses at all stages of growth. You can fund purchases of both new and used equipment. Financing can also help you upgrade your existing machinery to more eco-friendly, energy-efficient models, shrinking your business’s carbon footprint.
Finance Your Manufacturing Equipment
Looking to fund production machinery or upgrade your facility?
Submit your enquiry using the form below or speak directly with our team to explore structured manufacturing and production equipment finance solutions.
At Wenham Specialist Finance, we help businesses spread the cost of essential machinery while protecting working capital and supporting expansion.