How Manufacturing & Construction Sectors Use Asset Finance

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In order for your manufacturing or construction business to keep up with both competitors and technology often demands that you utilise the types of finance that ensures that you also keep a healthy level of working capital too.

Asset finance has become the preferred finance choice within manufacturing and construction because of the advantages this type of finance has for high cost purchases including plant equipment, commercial vehicles, scaffolding equipment, earth moving machinery, fork lifts, mechanical presses and lathes, cutting machinery, CNC machines and machine tools.

This is primarily true in these industries for three reasons:

  • New technology acquisition
  • The need for strong cash flow for purchasing
  • The removal of debt.

Purchasing New Technology

For many industries, new technology upgrades must be implemented in order to stay in line with industry standards and the rise in automation processes. It is often integral to the success of a business to integrate new technology effectively to produce more product for less overheads – in short becoming as efficient as possible. especially as construction lead ties continue to plummet.

But new technology costs money and the best stuff will cost a lot more making it untenable in terms of standard up-front finance. Which leaves asset finance, in many instances, the only viable funding.

Stronger cash flow

In terms of managing a budget, it’s a lot easier to manage asset finance since it requires only a fixed monthly cost. Moreover you won’t find that its borrowing terms are subject to change, either through interest rates or market volatility. Additional to this is that very often you’ll find that servicing is an included benefit, again saving potentially large maintenance costs.

Debt control

Asset finance allows your company to remove big debt obligations and replace them with more open and flexible forms of borrowing. Asset finance creates an arrangement that is looked and treated more like an expense than a debt – great if you are looking to ensure a good credit rating and for keeping loan options open in the future.

Further benefits to asset finance:

Spreads the cost – meaning you only pay for the asset as you use it, spreading the cost over its useable lifetime.

No huge upfront costs – big purchases can mean huge dents in working cash and capital outlay.

Flexibility – asset finance means you can either buy the product at the end of the agreement, renew the arrangement or choose an upgrade.

Cost planning – paying monthly for your assets allows for predictable, manageable budgeting for your business.

Speed – asset finance arrangements are usually a lot quicker than arranging business loans for purchasing upfront.

Cash-release from owned assets – in some circumstance it is possible to arrange finance eon machinery/equipment you already own freeing up cash.

Benefits of Hire Purchase

One of the most popular forms of asset finance in manufacturing is hire purchase. It is highly suited to acquiring machinery, vehicles, plant, machinery and anything which has a significant re-sell value.

In addition to its flexibility and ease to include in budget considerations, it offers a number of key benefits for your business:

Time to pay – Offers variable terms allowing costs to be spread over the lifetime of the asset.

Seasonal demand – Payments can be structured to incorporate any seasonal imbalances of your business.

Tax benefits – you can offset your hire purchase interest payments against your tax and reclaim VAT for capital cost.

Considering these benefits, it’s clear why asset finance is the preferred choice of finance for the manufacturing and construction sectors. Integral to this industry is the nature of your day to day activities requiring solid monthly budgeting and access to cash flow. But it also represents value in areas where new equipment and technology changes require rapid adoption in order to stay competitive.

Asset finance can offer you a cash injection when you most need it. To learn more about our finance packages call us today or request a call back for a free, no obligation chat with a member of our team.