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.
As we start the new year many of us will have plans to expand our business or perhaps look at new products and services. This may not be possible, however, without the extra costs involved in purchasing new equipment, new software and so on.
This extra cost burden can be off putting but if you take advantage of the Annual Investment Allowance (AIA) did you know that you can offset your investment in equipment and technology against tax?
Better still you can offset 100% of the investment against your taxable business income so not only do you get to improve your business operation and innovate, you can also reduce your tax burden at the same time. The allowance was also recently increased from £200k to £1million.
If you are planning to take advantage of the AIA this year you can use asset finance to spread the cost rather than invest all the cash in your business up front. This multiplies the benefit to your business.
The AIA was originally introduced in 2008 and the recent increase from £200k to £1million is designed to help stimulate investment in business at a time when it will be needed more than ever in the UK.
…Vehicles For Your Business?
There are many advantages to be gained from leasing using vehicle finance rather than purchasing a vehicle outright for your businesses. So it should come as no surprise that uptake continues to grow to the point where 300,000 cars were leased to UK companies according to statistics released last year (2017).
The two major attractions of financing rather than purchasing a vehicle include saving on the upfront cost and the ability to offset payments against tax. So while you may have enough cash in your business to purchase a van or a car, why would you when there are flexible ways to finance your vehicle and you can use that spare cash to fund and grow other areas of your business.
Vehicle finance like any other form of business finance works because you get to spend less cash which is ultimately what keeps a business afloat.
Vehicle finance can come in a variety of packages with the main ones being higher purchase agreements or business contract hire. The former is arranged on an agreed set monthly payment while the latter is an agreement to pay off the depreciation value of the vehicle.
Agreements can be arranged over a period that suits the business and its cash flow and the vehicle can either be sold at the end of the agreement or it can be transfer to your full ownership.