A guide to machinery finance

You don’t have to be in the manufacturing industry to rely on a wide range of machinery needed by your business.

Equipment as indispensable as your space and water heating system, electrical and lighting systems, air conditioning, lifts and escalators, and even the vehicles you use for your business all fall into the category of “plant and machinery”.

As such, any of these items your business owns qualify for valuable capital allowances on your tax liability. A more detailed description of the equipment that qualifies for such relief (usually 100%) is published on the government’s website, along with an explanation of how to claim.

Even though you are unable to claim tax relief by way of an asset you own, however, this is still available on the cost of financing the lease of plant and machinery you require.

Why you may need machinery finance

Whatever your business, there is a wide range of machinery you may need. It might be used in the manufacture of those goods you sell or it might be required simply in the operation of the premises used by your enterprise.

Either way, plant and machinery such as this is likely to be essential to the successful operation and growth of your business – the sooner you acquire the equipment, the sooner your business begins to benefit.

Machinery finance allows you to enjoy those benefits, which result in either the purchase or the lease of the plant and machinery.

Types of finance available

Two principal methods of acquisition have been mentioned – purchase or lease. Different types of finance are available for each of these options:

Hire purchase

  • hire purchase is probably one of the longest-established and best known methods of buying goods – including the machinery you need – on credit;
  • typically, it requires payment of an initial deposit, followed by equal monthly instalments over the life of the hire purchase agreement;
  • although ownership of the machinery does not pass to your business until the final payment has been made, since this is a form of borrowing to purchase a capital asset, the machinery in question appears in the balance sheet of the business;

Finance lease

  • another way of buying your plant and machinery through a finance lease – a lease period generally written to last more or less the useful economic life of the equipment;

Operating lease

  • if you have no intention of making a purchase, but simply want to enjoy exclusive use of the machinery for a given period – typically between one and five years – an operating lease may be the answer;
  • you may deduct the financial cost of such a lease from your tax liabilities, and the equipment does not appear as an asset in your balance sheet;

Why use ACF?

Here at ACF Direct, we have access to all these types of products. Thanks to our close working relationships with more than 40 providers, we aim to find the solution suitable for your particular business – at a competitive rate.

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