Manufacturing & Engineering Finance

For manufacturing and engineering businesses considering capital expenditure, hire purchase presents a good route to getting the essential assets your business needs. Typically, Hire Purchase involves an initial outlay covering the VAT and a deposit. The cost of the asset along with interest, is repaid through fixed monthly instalments, affected by whether you pay off the entire loan over the term or chose a final balloon payment. The final option to purchase is guaranteed for a nominal fee, transferring ownership of the asset to the customer.

Hire purchase is well-suited for situations where a company definitely wants to own the item at the end of the term, often where the asset has a significant usable lifespan, a high residual value and will not need to be upgraded.

When is it a good idea for your manufacturing or engineering business?

Hire purchase makes sense if:

• You definitely want to own the equipment in the long run.
• The machinery or technology you’re buying is expected to last a long time and still be valuable later on.
• You don’t anticipate needing to upgrade to a newer model quickly.

Equipment leasing allows a business to acquire hard or soft assets without the upfront costs associated with large purchases. A lender purchases the item, the business then leases it through fixed monthly payments over an agreed term.

Typically, asset finance is provided for high value ‘hard’ assets such as machinery, equipment, or vehicles, but Portman also arranges asset finance for ‘soft’ assets such as IT, fitness, catering, or vending equipment, as well as premises fit-outs, furniture or even air-conditioning.

Why might leasing be a good option for your business?

• Lower initial costs – You can get the equipment you need without a significant upfront investment.
• Predictable expenses – Fixed monthly payments can make budgeting for your business easier.
• Flexibility – At the end of the lease, you might have options to upgrade to newer equipment, extend the lease, or even purchase the asset (depending on the agreement).

Business loans are a way of borrowing money, which is repaid in monthly instalments, including interest, over an agreed term. Business loans are a common way to help smooth out cashflow fluctuations and take opportunities where otherwise they could be missed due to a lack of working capital.

Business loans can be secured or unsecured. Portman typically provides unsecured loans which can be more flexible and do not require collateral but are likely to require a personal guarantee. Secured loans are tied to an asset which the lender can claim ownership of if repayments are not made, these may be used in equipment refinance deals.

How can a business loan help your manufacturing or engineering company?

• Manage cashflow – Unexpected costs or slower payments from customers can sometimes create cashflow challenges. A business loan can provide a buffer to keep things running smoothly.
• Seize opportunities – If an opportunity comes-up like buying new materials at a discount from suppliers or expanding production to meet new demand, a business loan can provide the necessary funds quickly. Without it, you might have to miss out.

New businesses often need an injection of finance to get them off the ground. Asset finance for new businesses allows you to focus on running your company and bringing in customers, confident that you have the equipment, vehicle or stock you need without the large initial outlay.

Using finance for your equipment means that you preserve the credit card or overdraft for contingency and operating expenses when the unexpected happens.

Why use finance when you’re a new business?

• Get equipped, fast – You can get the machinery, vehicles, or materials you need to get operations up and running, without a massive initial investment.
• Focus on your business – Finance can allow you to free your focus and concentrate on what’s most important in the early days, running your company and attracting new customers.
• Keep cash for emergencies – By financing your equipment, you can save your credit cards or overdraft for unexpected situations or day-to-day operating costs. This gives you a financial safety net.

If you recently bought a high-value item outright but would now prefer to have financed it, we can help with a sale-and-lease-back agreement. If the item is less than 3m old, give us a copy of the invoice and we will calculate the current value. After a few checks and acceptance of the term and monthly repayments, we can give you the cash equivalent of the invoice to put back into the business. You’ll then make fixed monthly payments including interest, whilst your asset earns you money.

If your business owns high value assets that are not currently on finance, subject to a valuation, it is also possible to use them as security for a loan, with lenders offering a cash loan up to a % of the asset’s value.

Is refinance right for my Manufacturing or Engineering business?

• Unlock the value of you assets – If your business owns valuable equipment that isn’t currently finance, you can use it as security for a loan.
• Cash injection – Lenders can asses the value of your assets and can offer you a cash loan up to a certain percentage of that value.
• What’s the benefit of refinance? – In essence, equipment refinance allows you to tap into the value of your existing equipment, either by freeing up cash from recent purchases or by using un-financed assets as security to obtain a loan. This can provide valuable working capital for your manufacturing or engineering business.

Government-backed finance offers an excellent way of making sure your business gets back on its feet after the long-term effects of the pandemic and subsequent supply chain disruption. Businesses with turnovers up to £45m, including those who have previously benefited from the government’s CBILS, BBL or RLS, can apply.

GGS can be used for any legitimate business purpose or simply to provide cashflow. Rates are capped and the government continues to guarantee 70% of the outstanding balance, giving added security for lenders who are now able to consider finance for businesses who may have previously found it difficult to obtain.

Up to £2m can be borrowed on terms from 2 to 6 years. Your personal private residence cannot be taken as security.

How can Manufacturing or Engineering businesses use GGS?

• Cover supply chain disruptions.
• Invest in automations and efficient technologies.
• Manage cashflow disruptions or fluctuations.
• Support your growth and expansion costs.
• Refinance existing debt.