If your business required equipment to get ahead, having access to specialist equipment will be central to your success. Equipment financing allows you to rent equipment and potentially own it outright at the end of the lease.Get Finance
Equipment financing is a type of business loan, which enables businesses to purchase equipment and machinery on credit via an operating lease, hire purchase, or a finance lease. Hire purchase is short-term and best suited to equipment that you plan on replacing after the lease ends, in contrast, operating leases are long-term and it's often possible to purchase the asset at the end of the lease period. A finance lease is a type of equipment lease where the borrower (or 'lessee') rents an asset for most of the item's useful life.
The three types of equipment financing mentioned above allow a business to have the latest equipment and pay for it through monthly instalments with interest added. The equipment is used as security, so if you fail to meet repayments the equipment will be taken back by the lender. In the case of a capital lease, once the loan is paid in full, the business owns the piece of equipment. Equipment financing is a type of asset finance. The lender will purchase the equipment and insurers and maintain it. The business owner agrees to rent the equipment for a set period of time from 1 year up to 7 years.
This type of finance is popular for agriculture businesses. Farmers use expensive equipment to create efficiencies in their business, which leads to higher out and turnover. Yet, it often doesn’t make sense to put cash flow at risk to purchase this machinery up front. Another example would be the airline industry. Airlines often lease their plane over long-term leases in most cases, stretching from one up to twenty-five years.
Very few businesses have enough cash on hand to be able to purchase expensive equipment outright. Especially for new businesses, that amount of cash could seriously jeopardise cash flow if paid out for new equipment. For more established businesses, it also makes sense not to purchase equipment, especially if they intend on swapping it for a newer model in the future. This allows business owners to avoid dipping into cash reserves or working capital that can be used instead for business growth initiatives and to improve cash flow.
Tax efficiency Some types of equipment finance like equipment leasing and sale and leaseback are more tax efficient than buying outright. That's because when you lease an asset it's a monthly expense that is tax deductible.
Easy to budget and manage Equipment finance gives you predictable payments so you can spread the cost over time. That means that managing cash flow is easier so you can focus on running the business.
Flexibility and scalability If you finance a piece of equipment and your business starts growing, you can get more quickly without a large financial outlay. Whether you're ramping up production or getting extra vehicles, equipment finance is a great way to grow your business.
Access to other lines of credit One of the lesser-known but important reasons to use equipment leasing for buying equipment rather than buying it outright is access to other lines of credit. For similar reasons as tax efficiency, equipment finance is usually a predictable monthly expense, which means you can get another type of business finance alongside it. This is a huge advantage for some businesses — you could get the equipment you need, and take out a business loan for marketing, for example.
There's an almost limitless amount of industries and sectors eligible for equipment finance.
Bar and pub
Restaurant and takeaway
Café, bakery and coffee shop
Agriculture and farming
Buses, coaches, cars, vans, trucks and haulage
Finance for a garage or mechanic
Laundry and dry cleaning equipment finance
Manufacturing and heavy industry
Office and IT equipment
Racking warehouse equipment and shelving
Refrigeration and air conditioning
One of the advantages of equipment loans is that, if you’re eligible, they are quick to get, in fact, you could be approved for equipment finance in just 24 hours. This is great news for businesses that can’t wait weeks or months to purchase, replace or repair critical equipment.
1. To get started, confirm how much finance you need, what it’s for and how quickly you need the funds.
2. Our smart technology will compare 100+ lenders and match you with the right finance options for your needs.
3. A finance specialist will help you through the process from application to receiving your funds.
The amount of time you can take out an equipment loan will depend on a number of factors, including how expensive the equipment is, how much it is likely to lose its value and for how long the lender is willing to offer you the finance. It is possible to finance equipment for as little as a year up to seven years, and anywhere in between.
There are lots of different ways you can fund large equipment purchases. Here are some of them:
Hire purchase is similar to equipment leasing in the sense that you make regular payments for an asset; but as the name suggests, you're effectively purchasing the item and paying in instalments. The major difference is that it will appear on your balance sheet from the beginning, so it makes sense if you want to have the asset for the long term, or the asset will hold its value well.
Plant equipment finance is all about heavy machinery, machine tools, construction equipment and manufacturing equipment. If it lifts, shifts or has tracks like a tank, you can probably get it with plant machinery finance. Or maybe you need drive-in pallet racking shelving systems for your warehouse? You'd be surprised by the range of specialist heavy-duty items you can finance.
Disclaimer: Funding Options helps UK firms access business finance, working directly with businesses and their trusted advisors. We are a credit broker and do not provide loans ourselves. All finance and quotes are subject to status and income. Applicants must be aged 18 and over and terms and conditions apply. Guarantees and Indemnities may be required. Funding Options can introduce applicants to a number of providers based on the applicants' circumstances and creditworthiness. We are also able to make insurance introductions. Funding Options may receive a commission or finder’s fee for effecting such finance and insurance introductions.
*Eligibility criteria apply - see Tide website for full details.
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