If your business is entirely reliant on machinery, one of the challenges is the difficulty to outsource the best way to fund its purchase. Upfront purchase of machinery will not be a problem if you have a large amount of working capital. However, this is not always the scenario. In business, money is still a considerable challenge.
Subsequently, if this is your situation, several equipment financing options can help you buy the machinery you need within just 24 hours.
Different machinery finance options
Asset finance
One of the most popular machinery finance options. Indeed, no capital requirement from the business when applying for the loan. Instead, you will be asked to repay the loan in installment basis without disrupting your cash flow. Both small and huge enterprises use the lending earns from £1,000 to a maximum of £20,000,000.
Forms of asset finance for equipment financing
- Hire purchase
The agreement will allow you to spread the cost over an agreed repayment period. Thus, you will have the option to purchase the machine outright. In fact, the deal is ideal for purchasing machines that can potentially be sold again. You consider the machine as an asset for tax efficiency purposes.
- Refinancing
The fastest way to release the value of assets that you already own. It will enable you to fund the payment of new machinery you want to procure. The lender will purchase the asset from you and then refinances it back to you. The income which the machine generates will be the basis of the repayment agreement.
Refinancing can provide you with the cash required to purchase machinery, which may not be accessible through hire purchase and lease agreements.
- Finance lease agreement
Enables you to use machinery without purchasing the unit up front. Instead, you will be paying the lease of the machine over a flexible period. The good thing is that you can arrange the payment terms that will fit your financial capacity.
At the end of the finance agreement, you can opt to continue to hire the machine for a subsequent lease period, sell the machine, and retain a percentage of the income. Alternatively, you have the option to return the machinery to the provider. Its flexibility, the repayment period agreement, and the ability to receive some cash back make this form of machinery finance accessible.
- Operating lease,
The form is very similar to a finance lease. The difference is you can use the machine in one part of the asset’s life. The cost of the rent is based on the original price of purchasing and the residual value. Later, you will benefit from the reduction of rental charge. Your business will be able to use the asset for as long as you need it. However, you are not allowed to dispose of or sell the machine after the contract.
What is the application process for machinery finance?
Once you have your preferred form of finance, you are now ready to complete the application process. You can complete the process in just a few minutes. The release of funds is within 24 hours. To ensure the process will be quick and straightforward, prepare your complete financial documents in advance. You can know the full list when you started your research for your preferred form of financing.
The lending firm will be assessing your requirements to come up with the complete picture of your business. The review will include the financial aspects, trading patterns, and long-term direction of the company. The things you need to prepare would consist of; bank statements, evidence of trading, proof of identification, and your annual business turnover and income.
Eligibility criteria to avail equipment financing
The eligibility will depend on the lender. Although, most lending firms will consider factors such as the business’s credit rating, the amount you need to borrow, repayment term, trading period, and profitability of the company.
- The lender will examine your ability to repay the loan, according to your current financial situation and the potential future profit.
- The lender will consider any funds owed to you and also your debts.
- If the company is sole proprietor ownership or with a partner, the firm will review your financial capacity
- If your company has a low credit rating because of a history of missing payments, the lender will likely to decide that your application is high risk.
- Although, there is still a high likelihood that you can borrow funds if you provide security or a personal guarantee.