Manufacturing finance for machines and bigger orders

Manufacturing finance funds two things: the machinery that makes the product and the working capital that carries each order from raw materials to customer payment. Most manufacturers need both, often at the same time.

The cash cycle is long. Materials are paid for first, then labour, energy and machine time turn them into stock, and only then does the customer pay on credit terms. The longer each stage takes, the more cash is locked in.

Growth makes this harder. A new customer or a larger order is good news, but it can need cash weeks or months before the first payment arrives.

• New machines and production lines: business hire purchase if you want to own the asset, or equipment leasing for kit you expect to upgrade.
• Cash locked in owned machinery: asset refinance can release funds from equipment you already own.
• Waiting for customers to pay: invoice discounting is usually confidential and suits established sales ledgers.
• Materials for a large order: trade finance can pay suppliers, including overseas, with repayment once the goods are sold.
• Energy bills, tooling and general costs: working capital loans give a lump sum repaid over an agreed term.

Illustrative example only: actual costs depend on the lender and your circumstances. An engineering company buys a £100,000 machine, pays a £10,000 deposit and finances £90,000 on hire purchase over five years. If interest and fees totalled £18,000, it would repay £108,000 over 60 months, or £1,800 a month, and own the machine after the final payment.

Lenders want to understand how dependable your orders are and how easily the assets could be resold. Standard machines with an active second-hand market are usually easier to fund than bespoke or heavily adapted equipment.

• Your order book and how much of it depends on your largest customers
• Gross margin and how well you pass on material and energy cost increases
• Whether suppliers keep retention of title over materials, which can affect stock-based lending
• Debtor quality, including any contra trading where a customer is also a supplier
• Existing security, such as a debenture held by your bank

• Filed accounts and management accounts showing stock and work in progress
• Aged debtor and aged creditor reports
• Your current order book and key customer contracts or purchase orders
• Supplier quotes for new machines, including delivery and installation
• A list of owned machinery with serial numbers, for refinance

• Ask suppliers for a full quote covering delivery, installation, tooling and training, and check which costs the lender will fund.
• Plan for VAT. On hire purchase, VAT on the full price is usually payable at the start, though VAT-registered companies can normally reclaim it on their next return.
• Match the finance term to the machine's useful life, so you are not still paying for kit you have replaced.
• Speak to your bank before granting new security. An existing debenture may need its consent or a deed of priority.
• Review pricing clauses so material and energy increases can be passed on.

We are a commercial finance broker, not a lender. We help established limited companies, LLPs and partnerships of four or more partners in manufacturing and engineering find suitable lenders on our panel.

A dedicated relationship manager, a real person, works with you by phone, email and chat from your first enquiry until the lender pays out. They can help you structure machinery finance and working capital so the facilities sit well together.

We charge you no fee. We are paid a commission by the lender when the finance completes, and you can ask how much it is. Commission can differ between lenders. You can check your eligibility in about 60 seconds without affecting your credit score. Lenders run their own credit checks later, if you decide to apply, and make their own decisions.

Can I finance second-hand or imported machinery?

Often, yes. Lenders may want an inspection or independent valuation of used machines, and equipment bought from overseas may need a deposit paid before shipping.

Can invoice finance cover stage or milestone invoices?

Some providers will fund them, but many prefer invoices for completed deliveries. Contracts with complex acceptance terms may need a specialist lender.

What if one customer takes most of our output?

Lenders will still consider it, but they may limit how much they advance against that customer or ask for more information about the relationship and contract.

Will a lender take security over the business?

Often. Invoice and stock-based lenders typically take a debenture, and directors may be asked for personal guarantees. Read the terms carefully before you sign.