Equipment finance

Would you pay your rent several years in advance? Probably not — so why do the same for your business's equipment? That's where equipment finance comes in.

Many businesses depend on equipment to get the job done. And for some firms, new equipment might make the difference between stagnation and growth.

Whatever your sector, there's probably an asset that you'd like to have in your business — and depending on what you do, it could be anything from machine tools and yellow plant to catering equipment or commercial vehicles.

Spread the cost over time

But what if your business can't afford such big-ticket purchases? Many of these items run into the thousands of pounds, and for smaller businesses trying to grow, big up-front costs just aren't possible.

On the other hand, more established companies often don't want to buy an expensive piece of equipment outright, even if they can afford to do so — because the money could be spent on other things to benefit the business.

There are lots of different ways you can fund large equipment purchases. Here are some of them:

Equipment leasing

Equipment leasing is a great way to keep your inventory of assets in good order — regular upgrades, servicing, tax efficiency, and cashflow management are just some of the benefits of leasing assets.

There are two types of equipment leasing, known as operating leases and finance leases, which offer a range of different timeframes and levels of commitment, depending on what equipment you need.

Hire purchase

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

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.

Four benefits of equipment finance

There are many reasons you might choose equipment finance rather than paying up front out of your business's coffers. Here are four of the best:

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 item it's a monthly expense rather than an asset sitting on your balance sheet.
Easy to budget and manage

Equipment finance in most of its forms gives you predictable payments so you can spread the cost over time. That means that managing cashflow is that little bit simpler, and you can focus on running the business.
Flexibility and scalability

If you finance one piece of equipment and your business starts growing, you can get more items quickly without a large outlay. Whether you're ramping up production using a new piece of state-of-the-art kit, or getting hold of extra vehicles for expanding logistics, equipment finance is a great way to grow your rbusiness.
Access to other lines of credit

One of the often-forgotten but important reasons to finance equipment rather than buy 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.