Equipment Finance
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Author: Gary Hemming CeMAP CeFA CeRGI CSP
20+ years experience in business finance
Equipment finance is a type of business finance that allows businesses to fund equipment purchases. Equipment finance is a term that covers a wide variety of products available to fund the purchase of new equipment or machinery.
In this guide, we break down the different types of finance available to fund new equipment, who can take it out and how to get an equipment loan.
What is equipment finance?
Equipment finance is a term used to describe a range of specialist business finance products that enable businesses to secure equipment that would otherwise be unaffordable.
In essence, these products enable business owners to fund the acquisition of physical assets over a period of time, rather than paying the full cost upfront.
Equipment finance is generally a term used to describe a type of asset finance, but can also cover business loans, invoice finance and asset based lending.
What are the different types of finance available for equipment?
Looking at this as a type of asset finance, the key types of finance available for equipment purchases are the following.
Hire purchase
Hire purchase works much like a loan that is made specifically for the purposes of securing the equipment.
The loan is then secured against the equipment, meaning that it can be repossessed should you fail to pay.
When purchasing using hire purchase (HP), you are the legal owner of the equipment. As such you are liable for all repairs, maintenance and insurance and can use it as you see fit.
Equipment leasing
Equipment leasing is similar, but you are not the legal owner of the asset, instead, you simply lease it for the term of the agreement.
While you are not the legal owner, you still have full responsibility for maintenance and insurance, and have the freedom to use it as required – as long as it’s legal and doesn’t damage it.
When the term comes to an end, you can either purchase it for an agreed price or simply hand it back.
Operating lease
An operating lease is a simple agreement whereby you rent a piece of equipment for an agreed period and are not the legal owner of it.
Think of this like hiring a car for a period of time.
There will be restrictions on how it can be used and should you damage it, you will be liable for costs.
These agreements tend to be shorter term than the previous 2 options and offer no prospect of you becoming the owner of the equipment at the end of the term.
Who can take out equipment financing?
Any business can apply for equipment financing, whether you’re a sole trader, partnership, LLP or limited company. The type of equipment you require, the cost, your business and the type of funding required will decide whether you qualify.
What are the alternatives?
The alternatives are:
- Unsecured business loans – Unsecured business loans allow you to raise up to £250,000 in just a few days. For this reason, they are a strong option for those looking to borrow funds without the lender taking a charge over their property or equipment.
- Secured business loans – Secured business loans can be easier to qualify for than their unsecured counterparts and may allow you to borrow greater amounts.
- Merchant cash advance – A merchant cash advance allows you to borrow money based on your future card terminal receipts. It’s a popular option for those looking to buy new equipment who need funds quickly.
- Invoice factoring – Whether it’s invoice factoring or invoice discounting, releasing funds from unpaid invoices can free up the working capital needed to fund the purchase of new equipment.
How do I get an equipment loan?
The simplest way to get an equipment loan is to fill in the form on our site and one of our experts will guide you through the process.
As there are so many options available, working with an experienced broker is the best way to ensure that you end up with the most suitable product.
We work with lenders from across the market, so are perfectly placed to help you find the best product for your needs quickly. We understand the importance of investing in new equipment for a business and how it can ultimately drive you forward. That’s why we’re committed to helping business owners to find the best deal quickly.
What equipment can be financed?
You can finance the following:
- Plant and machinery
- Heavy machinery for construction, such as cranes, excavators and telehandlers
- Advanced technological equipment, including quality assurance and defect detection machines for electronics manufacturing
- Computers and workstations
- Custom-built machinery, like packaging equipment
- Specialised medical devices, including MRI scanners and dental X-Ray machines
- Purpose-built vehicles, such as agricultural tractors, articulated lorries, and refrigerated delivery vans
- Network infrastructure and equipment
- Furniture for office spaces
What types of business can benefit from this product?
We can help businesses in almost any industry, although those who face significant capital expenditure can benefit the most. Industries include:
- Manufacturing
- Construction
- Transport and logistics
- Healthcare
- IT and telecoms
- Agriculture
- Printing and packaging
- Renewable energy
- Food processing
- Cafes and bars
- Bars and pubs
- Events
- Garages and mechanics
- Refrigeration and air conditioning
Frequently Asked Questions
How quickly can I get the funds?
Equipment financing and leasing can be arranged very quickly, and it’s possible to get the money in just a couple of days.
Where your need is less urgent, you may be able to get a better deal from a lender who takes a little longer to complete – around 1-2 weeks. Your advisor will be able to discuss this balancing act with you to help you find the perfect offer.
Will I qualify if I have bad credit?
Yes, we can still arrange funding for business equipment for borrowers who have a poor credit history. While not every provider may choose to offer terms, we work with funders across the market, both lenders and leasing companies, so are best placed to find you a suitable deal.
What term can you offer?
This will depend on your business and the asset that you’re looking to fund. As some assets have a very short lifespan or very little resale value, funders will try to fit the term to the profile of the asset.
Will I qualify if I’m a sole trader?
Yes, we can still provide funding to sole traders, as well as partnerships, LLPs and limited companies.
