Plant finance covers a broad range of potential items of equipment that can be financed including excavators, skips, compressors, diggers, etc, etc. The full range of construction equipment can be considered for finance including waste and recycling equipment.
In fact the list of plant that can be financed is endless as long as it meets the normal plant finance criteria, namely that the plant & machinery is identifiable, moveable and durable. The basic concept is that the cost of the plant finance is spread out over a number of years within the expected useful life of the asset which aids the overall finances of the business.
An example where plant finance was put in place was a Plant Hire company that wanted to buy a used Komatsu excavator to add to its fleet of construction equipment that it hired out to various sites around the UK. The excavator was being bought second hand from a dealer with a purchase price approaching £50,000. A machinery lease agreement was put in place with payments taking place over a four year period.
Request a quote from our brokers for your plant finance requirements.
Many of our clients are finding that a sensible way of releasing cash for this business is to refinance existing assets that they already own. Many of the finance companies on the market are willing to refinance plant and machinery and other assets which are paid for already or have a reasonable level of value in excess of the existing loans for that equipment.
Refinancing plant and machinery is generally done on the basis that the equipment is durable, identifiable, and moveable.
Most equipment can be refinanced ranging from general plant and machinery, commercial vehicles, buses through to specialised production line machinery. The cash generated by the plant finance can then be used for any business purpose as required. This can include short term working capital which is especially useful when the banks are restricting access to further overdraft facilities or loans. Alternatively you may choose to invest the funds in purchasing other items of plant and machinery.
There are several methods of refinancing available:
Sale & Lease Back. In this case the plant and machinery is sold to the finance company by the current owner and then rented back to the seller for an agreed period of time according to an agreed regular payment schedule.
Sale & Hire Purchase Back. The plant and machinery is sold to the finance company by the current owner and then re-purchased by the seller over an agreed period of time according to an agreed regular payment schedule.
Loan & Chattel Mortgage. The finance company lends to the owning company (ie your company), with the security taken in the form of a chattel mortgage over the asset concerned.
Our brokers are experienced in refinancing plant and machinery and regularly put in place these types of agreements.
We frequently arrange machine finance for businesses involved in the engineering, manufacturing and production industries. It is fairly typical for machinery leasing to be used as the mechanism for financing the equipment that our clients need.
Machine leasing is efficient as it allows the capital that would otherwise be tied up in buying a new machine to be freed up for other uses within the business. In essence what the business does is to use the revenue generated by operating the machine to help fund the payments for the machine.
Many of our customers find themselves in the position where they know that they need to purchase a new item of machinery but the capital costs seem prohibitive, especially when cashflows are tight. If they take a different perspective and look at the monthly profit generated by the machine compared with the monthly lease payments that would be due under the machinery lease then it often becomes a straightforward decision. The net result is that the business achieves better production output and efficiency with more predictable budgeting of costs.
In general the lease payment can 100% be offset against profits so that machine leasing is a tax efficient method of accounting.
We had a client which was an engineering business in the early stages of development. They required a computer controlled lathe as a key item of equipment and were struggling to raise finance for this. Our brokers reviewed the client’s requirements and sourced a suitable machine lease for them.
Another client decided to purchase a machine for their production line from Europe. Their own bank was originally going to provide finance for the purchase but withdrew the finance offer at the last minute, causing great stress and frustration for our client and potentially endangering the whole investment. Our brokers then pulled together a proposal on behalf of the client and sourced the required machinery finance within seven days, enabling the purchase to go ahead.