Plant and machinery refinance put your yard to work twice

How does plant and machinery refinance work?

Plant and machinery refinance raises a lump sum secured on machines your business already has, which you repay monthly while carrying on using them. The amount depends mostly on what the kit would fetch today and how much, if anything, is still owed on it.

Plant is often a firm's biggest asset and its least liquid one. A groundworks contractor or plant hire business can have several hundred thousand pounds of machinery on its balance sheet while waiting weeks to be paid on applications for payment. Refinancing turns some of that value back into cash without selling the machines that win the work.

The British Business Bank describes asset refinancing as a way of freeing up cash from assets you already own, with the lender's offer shaped by the type of asset, its condition, its age and how much of it you own. Plant with a strong second-hand market, such as mainstream excavators, dumpers and telehandlers, tends to be the most straightforward. Fixed production lines, bespoke tooling and older or niche machines can still be considered but may support a lower advance.

We are a broker, not a lender, so we can approach lenders that specialise in plant rather than relying on one bank's appetite. If you're buying new or used kit instead, see plant and machinery finance. For a step-by-step explanation of the general idea, read can I refinance equipment I already own?

Key features

What businesses use it for

• Bridging retentions and slow applications for payment
• Mobilising for a large new contract
• Adding attachments or newer machines to the hire fleet
• Restructuring several plant HP agreements
• Paying down expensive short-term borrowing
• Funding a yard move or workshop investment

What lenders look at when valuing plant

Plant hire firms and contractors

For plant hire businesses, the machines out on hire are the business, and their value often outstrips the overdraft or loan a bank would offer on the accounts alone. Lenders familiar with the sector will look at utilisation and the hire contracts behind the fleet, not only last year's profit. That's why refinance can work when a mainstream lender has said no to unsecured borrowing.

Contractors face a different squeeze: retentions held back, applications for payment that take weeks to clear and materials that need paying for upfront. Releasing equity from owned excavators or dumpers can cover that gap, but it's worth comparing with invoice finance if the problem is purely timing on invoices you've already raised.

Tax points to check with your accountant

If refinancing involves selling machinery to the lender, as in a sale and leaseback, that sale is a disposal for capital allowances. HMRC guidance confirms that disposing of plant on which full expensing has been claimed triggers a balancing charge, and GOV.UK's HS252 helpsheet explains how balancing charges can arise for other allowances too. A refinance loan where you keep ownership may be treated differently. The right structure depends on your allowances history and year end, so please speak to your accountant before agreeing terms.

What lenders typically look at

• An asset list with make, model, year, hours and serial numbers
• Proof of ownership or settlement figures for financed machines
• Recent business bank statements, typically three to six months
• Latest filed accounts and current management figures for larger amounts
• A clear reason for the funds and how repayments will be met
• Details of directors or owners for identity and credit checks