For many businesses, particularly those in construction, agriculture, manufacturing, and logistics, investing in new (or used) plant machinery is necessary for growth and efficiency.
But, and it’s a big but, the capital outlay required for this type of equipment can drain bank balances and destroy cash flow.
This is where plant and machinery finance comes into play. Evangate FS will help find the best solution to fund equipment without draining your capital reserves.
In today’s cutthroat business landscape, having the right machinery can be the difference between profitability and losing to your competitors!
Understanding Plant Machinery Finance
Plant & machinery finance is a type of funding designed to help businesses acquire equipment (typically large machines or production/manufacturing kit) without the worry of having to outlay large upfront fees for outright purchases.
It allows companies to spread the cost of expensive machinery over an extended period (12 – 84 months) through structured payment plans. The agreements can even be shaped to align with business operational needs, equipment depreciation rates, and seasonal trends.
That is why we always recommend a quick 10-minute chat with our UK-based team so we can find the lowest monthly payments with the best terms for you.
Why Choose Financing Over Outright Purchases
First and foremost is preserving cash flow. By going down the route of using finance, businesses can retain working capital for areas, such as new stock, inventory management, staffing, and marketing activities, or set aside a reserve for other unexpected expenses.
Having this flexibility is particularly useful for seasonal businesses (think Christmas tree growers) or those going through expansion phases where cash reserves are vital for operational stability.
Secondly, tax efficiency. Depending on the finance arrangement and tax laws, businesses may benefit from VAT offsets, tax deductions on lease payments or interest costs. It’s better to keep the money in your bank account than HMRC’s.
And thirdly, is risk mitigation. With technology evolving rapidly and the introduction of AI, financing provides the option to upgrade or replace equipment without being tied to old and tired kit. This flexibility is particularly helpful in industries where technology advancements can quickly render machinery ‘out-of-date’ or less efficient than newer models.
In fact, even the humble farmer’s tractor is being equipped with AI to automate mundane tasks, making them more efficient.
Different Plant Funding Options
Our team have looked into four popular ways of spreading the cost of equipment over time and explains where each one offers distinct advantages depending on your business needs.
Hire Purchase Agreements
HP is one of the more popular plant finance solutions. With this type of arrangement, companies make monthly payments over an agreed term (usually 1-7 years) to eventually own the equipment outright.
The finance company initially purchases and retains ownership of the machinery, such as an excavator, forklift, or CNC machine – until the final payment is made. At that point, ownership automatically transfers to the business.
This offers advantages, including fixed monthly payments for simpler budgeting, potential tax benefits through capital allowances on the equipment and interest deductions. Additionally, because the agreement is secured against the machinery itself, hire purchase can be suitable for businesses with limited trading history or those with adverse credit scores.
Finance Leasing
For businesses that need new plant machinery but don’t want to ever own it, finance leasing is a good alternative. Here, the leasing company purchases and maintains legal ownership of the equipment such as bulldozers, cranes, or manufacturing systems – while granting the business (the lessee) exclusive use of the plant and equipment.
However, the lessee is responsible for maintenance, repairs and insurance despite not being the legal owner. But there are other accounting benefits, as lease payments can usually be fully deducted as business expenses, improving cash flow and potentially reducing corporation tax liabilities.
Unlike hire purchase, at the end of the lease period, the business typically has several options: extend the lease with reduced payments, arrange for a third party to purchase the equipment (with the company often receiving a portion of the sale proceeds), or return the asset.
Construction companies, quarrying operations, and manufacturing facilities often favour finance leases for heavy machinery.
Operating Leases
Operating leases are proving particularly useful for projects with shorter defined timeframes (1 – 3 years) where businesses need equipment for seasonal operations or when they only want access to the latest machinery innovations.
With operating leases, the finance company retains both legal ownership and the associated risks, including depreciation of the equipment and the potential for it to be superseded by newer technology.
This type of business finance has several advantages: lower monthly payments compared to hire purchase agreements, comprehensive maintenance packages often included in the contract, and the ability to regularly upgrade to newer models as technology evolves.
And from an accounting point of view, operating leases have historically been treated as “off-balance sheet” financing.
Industries with rapidly evolving technology, such as precision manufacturing, science & robotics, advanced logistics operations, and high-tech construction, tend to favour operating leases for equipment that may become obsolete within a few years.
Equipment Refinancing
Asset refinancing is an under-utilised finance option for plant and machinery operators. For businesses that already own plant machinery outright but want to release the capital tied up in these assets for expansion, clearing high-interest debts, or purchasing other equipment, this is worth considering.
In this case, a finance company effectively purchases the equipment from the business (e.g. excavators, production lines, tractor units, trailers, etc.), providing an immediate cash injection while at the same time arranging for the company to lease back the same machinery through hire purchase or lease agreements.
One of the main benefits is that the business keeps uninterrupted use of the equipment throughout the refinancing process, experiencing no operational disruption while gaining access to working capital.
Asset refinancing terms typically range from one to five years. Construction companies with large equipment fleets, manufacturing businesses with valuable production machinery, and transportation firms with lots of vehicle assets commonly leverage equipment refinancing.
Pros & Cons of Plant Machinery Finance
Like anything in the finance industry, there are pros and cons of equipment leases or business loans; our team outline the key considerations:
Multiple Advantages
- Reduces significant upfront equipment costs (capital expenditure)
- Fixed monthly payments improve budgeting forecasting
- The financed equipment typically serves as the security
- Providers often cover maintenance and insurance costs
- Potentially more cost-effective than traditional bank loans
- Preserves valuable working capital for other business needs
- Allows equipment to be upgraded as technology advances
Potential Downsides
- Risk of asset repossession if payments are missed
- Specific damage may not be covered by insurance
- Higher total cost compared to outright purchase due to interest
- Varying maintenance responsibilities based on agreement type
- Potential early termination penalties if your circumstances change
Example Plant Machinery That Can Be Financed
Virtually all types of plant machinery can be secured through the finance options above. Though the best option for your business will depend on your individual circumstances and longer-term goals.
For example, rapidly evolving technology may make operating leases more suitable for certain types of manufacturing equipment, while long-lasting construction machinery may benefit from hire-purchase arrangements. Speak with our team today if you are considering any of the following plant.
| Type of Machinery | Examples | Hire Purchase | Finance Leasing | Operating Leases | Asset Refinancing |
|---|---|---|---|---|---|
| Construction Equipment | |||||
| Excavators | JCB 220X, Caterpillar 320, Komatsu PC210 | ✓ | ✓ | ✓ | ✓ |
| Bulldozers | Caterpillar D6, Komatsu D65EX | ✓ | ✓ | ✓ | ✓ |
| Cranes | Liebherr LTM mobile cranes, Potain tower cranes | ✓ | ✓ | ✓ | ✓ |
| Concrete Mixers | Schwing Stetter, SANY | ✓ | ✓ | ✓ | ✓ |
| Loaders | JCB 437, Caterpillar 950 GC | ✓ | ✓ | ✓ | ✓ |
| Agricultural Machinery | |||||
| Tractors | John Deere 6M Series, New Holland T7 | ✓ | ✓ | ✓ | ✓ |
| Harvesters | CLAAS LEXION, John Deere S700 Series | ✓ | ✓ | ✓ | ✓ |
| Sprayers | John Deere R4040i, AMAZONE UX | ✓ | ✓ | ✓ | ✓ |
| Balers | New Holland BigBaler, CLAAS QUADRANT | ✓ | ✓ | ✓ | ✓ |
| Irrigation Systems | Valley center pivots, Lindsay systems | ✓ | ✓ | ✓ | ✓ |
| Manufacturing Equipment | |||||
| CNC Machines | Haas VF-2, DMG MORI DMU 50 | ✓ | ✓ | ✓ | ✓ |
| Injection Molding | ARBURG, ENGEL machines | ✓ | ✓ | ✓ | ✓ |
| Production Lines | Customized assembly systems | ✓ | ✓ | ✓ | ✓ |
| Industrial Presses | Hydraulic and mechanical presses | ✓ | ✓ | ✓ | ✓ |
| Robotic Systems | ABB, FANUC, KUKA robots | ✓ | ✓ | ✓ | ✓ |
| Transportation & Logistics | |||||
| Forklifts | Toyota 8FGU25, Linde H20D | ✓ | ✓ | ✓ | ✓ |
| Commercial Vehicles | DAF XF, Mercedes-Benz Actros | ✓ | ✓ | ✓ | ✓ |
| Material Handling | Conveyor systems, automated storage | ✓ | ✓ | ✓ | ✓ |
| Reach Stackers | Hyster RS46, Kalmar DRG | ✓ | ✓ | ✓ | ✓ |
| Warehouse Equipment | Pallet trucks, order pickers | ✓ | ✓ | ✓ | ✓ |
| Specialized Industry Equipment | |||||
| Medical Equipment | MRI machines, CT scanners | ✓ | ✓ | ✓ | ✓ |
| Printing Presses | Heidelberg, Komori | ✓ | ✓ | ✓ | ✓ |
| Food Processing | Industrial mixers, packaging lines | ✓ | ✓ | ✓ | ✓ |
| Mining Equipment | Crushers, drilling rigs | ✓ | ✓ | ✓ | ✓ |
| Renewable Energy | Solar installation equipment | ✓ | ✓ | ✓ | ✓ |
Key Lenders In The Plant Machinery Finance Market
For some business owners, the first place they look is at traditional banks. However, more often than not, high-street banks only provide equipment loans and leasing options for well-established businesses with strong credit histories and may not offer financing for used equipment.
The banks also tend to require you to jump through more hoops and have a longer approval process – and the rates may not be the best available.
As an asset finance broker, Evangate Financial Services works with multiple lenders who specialise in finance for machinery and plant for every business, no matter your size or credit score.
Our team has hand-picked lenders who can provide more flexible terms and cater for all types of plant and specialist machinery (which the banks won’t touch).
This often translates into better deals and faster approval for businesses in search of new and used equipment. Here are a few of the lenders we work with:
- Lloyds
- DLL
- BPCE
- Haydock
- Liberty Leasing
Next Steps
If you would like to receive a free quote or simply to discuss different equipment finance solutions, the Evangate FS team would be happy to assist.
Please complete the form below or call us at 0800 488 0230.
