Plant & Machinery – Asset Finance Solutions by Industry

Types of Finance

Asset-based Funding Solutions for the plant & machinery industry

Plant and machinery are the cornerstone of countless sectors, powering progress in construction, agriculture, manufacturing and logistics. To stay competitive and efficient, businesses in this sector must continually invest in or replace their fleet. This leads to substantial upfront costs which can impede growth and hurt cashflow.

We understand the unique financial challenges faced by businesses in this vital industry, which is why we offer a range of tailored asset finance solutions to help you acquire, upgrade, or replace your plant. Discover how asset finance can benefit your business, or contact us directly for expert guidance.

A Quick Outline of Asset Finance for Plant & Machinery

Asset finance is a financial arrangement that enables plant and machinery businesses to acquire essential equipment without the need for upfront payment. By spreading the cost over a fixed term, businesses can preserve working capital for contingency and operational costs. Asset finance is broadly divided into Finance Lease and Hire Purchase.

5 Benefits of using Asset Finance to buy Plant & Machinery

1) Preserve business cashflow ▶ ▶ ▶
Focus on core operations without draining resources and preserve vital working capital by spreading the cost of assets over time.

2) Embrace and access the latest technology ▶ ▶ ▶
Stay ahead of the competition by acquiring the latest technology to enhance business efficiency, quality, and output, offering a better service than your peers.

3) Maximise tax efficiency ▶ ▶ ▶
With asset finance, there are potential tax benefits depending on the type of finance acquired (read more on the different types with our helpful article). Lease agreements are an operational cost which reduce profitability therefore corporation tax bills. Hire Purchase agreements often allow you to claim capital allowances such as Full Capital Expensing which also reduce your tax bill.

4) Get what you need straight away ▶ ▶ ▶
Just won or need to win a contract? Need to urgently replace machinery? The sudden need for plant can hit cashflow. Use finance to respond quickly and get back to earning the revenue that grows your business.

5) Refinance ▶ ▶ ▶
Refinance is a loan secured against a piece of equipment not already on finance. Release cash using a sale-and-lease-back approach for high value or recently bought items so secure funds at great rates. Use them to buy further machinery or cover costs.

Types of Asset Finance for Plant & Machinery

Hire Purchase (HP) for Plant & Machinery

Hire Purchase (HP) involves paying the VAT and a deposit upfront then making regular payments over a fixed term, with the goal of owning the asset at the end of the agreement, either automatically or after making a ‘balloon’ payment.

Customer Example of Hire Purchase

A groundworker may win a new contract and need to expand its fleet of excavators to meet the increased demand. Purchasing new equipment outright would require a significant upfront investment, cash that is actually needed to pay wages until the first staged payment is met.

By opting for finance, the excavators can be bought while spreading the cost. Leaving the working capital to cover immediately operational costs and to act as contingency in case of project delays.

Benefits of Hire Purchase for Plant & Machinery

⏵ Preserves cashflow – By breaking down the purchase price of an asset into manageable instalments, plant and machinery business can maintain healthy cashflow. This means freed-up capital can be used for alternative operational expenses, research, developments, or expansion.

⏵ Access to the latest technology – Hire purchase enables business to acquire the latest plant and machinery without a significant upfront investment. Staying up-to-date with technology can not only maintain a competitive edge but improve business efficiency and productivity.

⏵ Ownership of asset – Unlike leasing, hire purchase leads to ownership of the equipment once the final payment is made. Owners can then benefit from potential resale value, selling the asset if needed, providing flexibility.

⏵ Predictable costs and finance simplicity – Hire purchase instalments remain constant throughout the agreement, making budgeting easier for businesses. This means plant and machinery companies can accurately forecast financial obligation. In addition, Hire purchase agreement are generally easier to understand and manage compared to other financing options.

⏵ Tax benefits – Hire purchase can come with potential tax deductions. Talk to your accountant about claiming capital allowances

Is Hire Purchase right for my business?

Hire Purchase offers flexibility, tax benefits, and the potential for asset ownership, making it an attractive option for businesses looking to acquire new equipment and improve their operations.

If you are still unsure if Hire Purchase is right for your business, our experts can find the right funding for you. Find out how Portman can help by making an enquiry with us. Alternatively, learn more from our Hire Purchase finance page.

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Finance Lease Agreements for Plant & Machinery

Finance Lease is another popular method to acquire plant and heavy machinery. It’s similar to Hire Purchase but with a key difference: the asset is treated as owned by the lessee for tax purposes.

Finance leasing does not require the VAT to be paid upfront nor typically as big a deposit as a HP agreement. Operating Lease payments are effectively rentals, meaning they act as an operating cost which are deducted from your profit and result in paying less corporation tax.

Customer Example of a Finance Lease

A logistics business is expanding and needs a new HGV. However they also need to renovate their offices and have a choice over how and how much to use of their working capital. By using a finance lease, the company can acquire the HGV without a significant upfront investment. The tax benefits can help offset the cost, and the predictable payments can improve cash flow management. At the end of the lease term, the company can return the HGV, continue leasing or ask about ownership options through ‘passing title’.

Benefits of a Finance Lease for Plant & Machinery

⏵ Flexible lease terms – Finance leases can be structured to match the specific needs of a business by considering factors such as equipment lifespan, cashflow, and growth plans. Leases are particularly suitable for financing high-value assets like heavy machinery, production lines, and specialised equipment items.

⏵ Risk mitigation – A great benefit of leasing for plant and machinery industries is hedging against obsolescence; in industries with rapid technological advancements, finance leases allow businesses to upgrade equipment without being locked into ownership of outdated assets. With a lease, typically the lessor bears the risk of asset depreciation and disposal.

⏵ Improved cashflow – By spreading payments over time, businesses can maintain a steady cashflow, allowing for reinvestment in operations or other growth initiatives. Lease allows for balance sheet management. While the asset appears on the balance sheet, it’s offset by corresponding liability, potentially minimising the impact of financial ratios.

⏵ Tax advantages – Lease payments might be considered as operational expenses, potentially resulting in tax advantages. Talk to your accountant.

⏵End of lease options – Continue leasing, give back, or explore ownership options at the end of the term.

Is a Finance Lease right for me?

Finance Lease is a valuable financing option for businesses seeking to buy plant or heavy machinery. It offers tax benefits, lower upfront costs, flexibility, and reduced risk, making it an attractive choice for businesses seeking to acquire or upgrade their fleet without significant ownership commitments.

Discover how we can assist you with your equipment financing needs. Visit our Lease Financing page to learn more or apply directly. Or get a finance quote online and get started.

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Contract Hire/Operating Lease (OL) for Plant & Machinery

Operating lease offers flexibility for businesses that need to regularly update their equipment. It can include maintenance and repair costs in the rental payments.

Contract hire is essentially another term for an operating lease, specifically within the context of vehicles. However, its application can be extended to other assets like plant and machinery. This option generally involves giving the item back at the end of the term.

How is an Operating Lease Beneficial for Plant & Machinery?

Operating leases are particularly popular amongst industries where assets are expensive and have short lifecycles, rapid technological advancements or changes, or businesses that are challenged by high seasonal demand.

Benefits of an Operating Lease

⏵ Preserving cash flow – For capital-intensive industries like manufacturing, operating leases help manage cash flow and keep assets off the books.

⏵ Risk mitigation – By avoiding ownership, companies can protect themselves from the depreciation and obsolescence risks associated with machinery.

⏵ Upgrading flexibility – Regular technology upgrades are essential for competitiveness. Operating leases can facilitate this by allowing for frequent equipment replacements.

⏵ Scalability – As production needs fluctuate, businesses can easily adjust their fleet through operating leases.

Key Characteristics of Contract Hire

⏵ Fixed monthly payments – Similar to operating leases, contract hire involves regular fixed payments for the use of an asset.

⏵ No ownership – The lessee (the business) does not own the asset; the lessor retains ownership.

⏵ Maintenance included – Contract hire agreements can include maintenance costs, making it a comprehensive package for the lessee.

⏵ End-of-contract options – At the end of the contract, the lessee typically returns the asset or has the option to purchase it (often at a pre-determined price).

Customer Example of an Operating Lease

Operating Lease for Plant & Machinery

A farmer requires a new, advanced tractor with radar integration designed to improve soil management. Purchasing the tractor outright would require a significant initial investment, which will impact cash flow. The machinery market is dynamic, with new models and features emerging frequently. Whilst the second hand market has typically been strong, ownership would expose the farm to the risk of obsolescence.

With fertiliser and feed prices in flux, the farmer decides not to risk the contingency fund and look at finance, without the desire to own this particular unit in the long term.

Contract Hire for Plant & Machinery

A forestry business wins a contract to carry out logging, but knows it to be a fixed 2 year project. They want new equipment and a maintenance contract to carry out the work in a new location. As a new project they may run into delays and so want to keep their free cash available as contingency.

At the end of the project ,they may not need to keep the machines. Instead of purchasing them outright, they opt for a finance agreement.

How could Contract Hire / OL help my Plant & Machinery Business?

In essence, an operating lease for plant and machinery offers a flexible and cost-effective way for businesses to access the equipment they need while managing financial risks and optimising operations. While there are common industries that benefit from an operating lease, the suitability of an operating lease depends on various factors specific to each business such as financial situation, asset type, and business objective.

Contract hire offers capital preservation, predictable costs, access to latest tech, reduced admin, off-balance sheet financing, flexibility, and potential tax benefits for plant and machinery businesses. By outsourcing equipment management, companies can focus on core operations.

Contract Hire compared to Operating Lease

While contract hire is essentially an operating lease, there might be slight variations in terms and conditions depending on the specific agreement and industry. However, the core principles of both remain the same: the lessee uses the asset for a fixed period, pays regular payments, and does not own the asset.

Find out how Portman can help, learn more or apply for an Operating lease / Contract hire through our finance page. Alternatively, request a quote and make a finance enquiry online.

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Asset/Equipment Refinance for Plant & Machinery

Refinance your existing plant and machinery to potentially lower monthly payments or release equity through a secured loan.

How could my business use equipment refinance?

Upgrade equipment, consolidate debt, improve cash flow, manage economic challenges, and benefit from lower interest rates with a loan secured against your high value plant or machinery.

⏵ Key Benefits of Equipment Refinance

Equipment refinance offers several advantages for businesses who own plant and machinery:

• Improved cashflow – By refinancing existing equipment, businesses can unlock capital tied up in assets, providing immediate cash injection for operational needs or expansion.
• Lower monthly payments – Refinancing existing deals might result in lower monthly payments, freeing up cash for other business expenses.
• Debt consolidation – Multiple finance agreements can be streamlined into a single, potentially lower-cost loan, simplifying repayments.
• Access to funds for new equipment – The released capital can be used to acquire newer, more efficient plant and machinery.
• Potential tax benefits – Depending on specific circumstances, refinancing may offer tax advantages.

Customer Example of Equipment Refinance

A construction company may be experiencing significant growth and need to expand with a variety of investments in their plan. They would like to get a great deal on finance to fund their projects. Using their yellow plant as collateral, the business is able to obtain a business loan at lower rates due to the security added by the vehicles.

Find out how Portman can help, enquire about Equipment Refinance.

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Asset Finance Overview

Asset finance offers a range of options to suit different business needs. Understanding these options is important for making informed financial decisions.

At a glance, asset-based lending for plant & machinery business

Asset Finance Options	How it works	Why would a Plant & Machinery Business use it?
Hire Purchase [Hire Purchase Options]	VAT and deposit paid upfront. Ownership of the asset passes to the business at the end of the agreement after making final payment.	To own the asset outright but spread the cost over time. Suitable for assets that will be used for a long period. Use case – Purchasing a new excavator to replace an old one.
Finance Lease [Finance Lease Options]	VAT spread across the term. At the end of the lease businesses can return or continue renting the assets ,or explore ownership options. The business can usually claim tax relief on the lease payments.	To benefit from tax advantages and use the asset for a long period. Suitable for high-value assets. Use case – Leasing a large construction plant for a long-term project.
Operating Lease [Operating Lease Options]	The business rents the asset for a fixed period. Ownership remains with the finance company.	To access the latest technology without long-term commitment. Suitable for assets that rapidly become obsolete. Use case – Leasing a fleet of trucks for short-term project work.
Contract Hire [Contract Hire Options]	Similar to operating lease but typically for vehicles. Includes maintenance and servicing.	To manage vehicle costs effectively and focus on core business operations. Use case – Leasing a fleet of vans for delivery services.
Asset Refinance [Refinance Options]	Taking out a loan secured against an owned asset often to release cash or acquire new assets.	To unlock capital tied up in existing assets or upgrade equipment. Use case – Refinancing an old digger to purchase a newer, more efficient model.

The best finance option for your business depends on factors such as the type of asset, the length of time you require, your business credit background.

▶ ▶ ▶ Explore more Plant, Machinery & Heavy Equipment Finance or start a new enquiry with us.

Alternatives to Asset Finance

While asset finance is a popular choice for acquiring plant and machinery, several alternative financing solutions are available to businesses seeking to acquire or upgrade their equipment.

Business Loans

Business loans provide a lump sum of money to make any legitimate business purchase, often suited to projects or the need to buy an array of different items.

Term Loans

Term loans offer predictable repayment structures with competitive interest rates. This option aligns well with businesses seeking stability in their cash flow and long-term planning.

▶ ▶ ▶ Browse Business Loan Options

Short-Term Loans

Provide rapid access to funds for urgent needs, although typically associated with higher interest rates. These loans are best suited for businesses with immediate needs and the capacity to repay swiftly.

▶ ▶ ▶ Explore Short-Term Loan Options

Flexi Loans

Offer flexibility with adjustable repayment terms and the ability to access additional funds as required. They usually do not have early repayment fees. The flexibility inherent in flexi-loans allows businesses to align their financial obligations with operational demands.

▶ ▶ ▶ Discover Flexi Loan Options

Bridging Loans

Designed for short-term financing needs, such as bridging the gap between finishing a project and getting paid for its completion. Businesses with a clear exit strategy for asset disposal, often a property, find bridging loans useful.

▶ ▶ ▶ Find Bridging Loan Options

▶ ▶ ▶ Just fancy a chat? Contact us today to discuss your financing options.