Here’s How Farm Finance Can Help
Growing a farm business much like any other business is no easy task if a business lacks the finance to fund growth. For these farms it is almost inevitable that financial help will be required at some point to grow the business.
Tractors are a critical component in the day to day running of a farm and one of its most important pieces of machinery. An unreliable or outdated tractor can impact on productivity and efficiency as well as cost the business money much as the opposite is true if you are purchasing a good, reliable up to date model.
A tractor can cost in excess of £250,000 which is a substantial sum for any business and even standard models can cost in the region of £80,000. So, like any investment decision, buying a tractor will require a careful assessment of the improvements it is likely to bring to the business and how it will impact on the bottom line.
Tractor purchases can be made in the form of lease or HP arrangements that provide farm business with a more flexible way to purchase machinery they need. Even if the business has sufficient finance to purchase these machines outright it, asset finance can still offer flexibility and help protect funds for a rainy day.
Machines are critical to growth in the manufacturing sector but they are often expensive and can eat into business profits without some form of financial help.
Traditionally business owners turn to the bank to provide straightforward business loans to help if there is insufficient cash in the business to purchase machines. Even if there is enough cash to buy a machine, a loan can be a more sensible way to buy equipment particularly if there is risk attached in making large investments as there often is in business. However, business loans from banks also come at a cost and interest rates can be high.
Having multiple loans can also leave a business vulnerable in a downturn and restrict any cash flow available to grow the business. Machine finance is growing in popularity because it unlocks funding when you need it.
So if your business requires a new machine that will cut down the amount of manual labour required to get jobs done such as a CNC machine, machine finance can help you acquire that machinery at a minimum upfront cost.
This means you get the benefit of improved efficiency and profitability while spreading the cost. It can also be tax efficient now that the government has increased the annual investment allowance. So it comes as no surprise that the machine finance sector has grown 9% year on year.
Any thoughts of the manufacturing sector being hit by the uncertainty around Britain leaving the EU Certainly hasn’t been felt in the machinery finance sector where growth has hit 9% compared to the previous year.
Analysts say the UK asset finance market as a whole look set for a record period of growth in 2019 on the back of a broadly stable 2018. Last year saw a mixed pattern of growth in some sectors and declines in others. IT asset finance for example saw a fall of 32% while other sectors such as machinery and business equipment finances saw increases, the latter seeing 8% growth in the same period.
Machinery finance may well see further year on year growth in 2019 if manufacturing receives a boost and more business owners take advantage of the temporary tax benefits that will come as a result of taking advantage of new Annual Investment Allowance limits.
Machine finance can be particularly useful for investing factory machinery such as CNC machines, which can be expensive to purchase outright. Machine finance provides a way of investing in machinery without having to risk huge amounts of money which can be better used in expanding business operations, research end development.