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.
While the asset finance sector continues to grow as a source of funding for SMEs, businesses remain hesitant to take advantage of this and other funding options stifling their ability to grow.
This conclusion was drawn after one survey found that more than a third of SME business owners look to avoid borrowing money at any cost.
Asset finance for new business grew six percent year on year in the month of July in deals of up to 20 million. Overall, however, new business fell when higher value deals were taken into account indicating the reluctance to borrow mainly affects the owners of businesses in need of higher than average levels of funding.
The figures released by the Finance & Leasing Association (FLA) did report a more positive trend on the plant and machinery sector with new business rising 20% year on year in the month of July.
The findings show that asset finance remains a vital part of the funding needed to support businesses and in turn the UK economy. The British Chamber of Commerce this month painted a gloomy picture of the UK’s economic prospects Vs the Eurozone.
This only increases the importance of the contribution made by the asset finance industry to future prosperity following Brexit.