Machinery Finance UK 2026: How to Fund Plant and Industrial Equipment

What is machinery finance?

Machinery finance is asset finance specifically structured for the purchase or refinance of plant, industrial and agricultural machinery. It allows UK businesses to acquire the equipment they need to operate without committing the full purchase price from working capital, instead spreading the cost over the machinery's working life through fixed monthly payments.

The machinery itself provides the security for the lender. Because plant and agricultural equipment typically has a well-established secondary market and predictable depreciation curve, it is among the most straightforward asset classes for lenders to underwrite and for borrowers to access. Loan-to-value ratios on new plant machinery are typically 80 to 100 percent of the purchase price, falling to 60 to 80 percent for used and second-hand equipment depending on age and condition.

UK Finance statistics show that plant and machinery is the largest single category of asset finance new business in the UK, accounting for over £12 billion per year. The sector spans everything from £5,000 forklifts financed for small warehouse operators to £5,000,000 combine harvesters and industrial presses financed for agricultural businesses and manufacturers.

Types of machinery finance

Hire purchase for machinery

Hire purchase is the most common product for plant and machinery finance. The lender purchases the machinery and the business makes fixed monthly instalments over an agreed term, typically 24 to 60 months for plant equipment and up to 84 months for larger agricultural machinery. Legal ownership remains with the lender during the agreement and transfers to the business once all instalments and an option-to-purchase fee have been paid.

For tax purposes, hire purchase is treated as a purchase from day one. The business can claim the Annual Investment Allowance (AIA) on the full cost of the machinery in the year it enters use, subject to the £1,000,000 AIA limit for 2026/27. This means a business buying a £150,000 excavator on hire purchase can deduct the full £150,000 from taxable profits in year one, even though it is paying over five years. HMRC's Capital Allowances Manual at CA20000 sets out the treatment in full.

Finance lease for machinery

Under a finance lease, the lender retains legal ownership of the machinery throughout and after the agreement. The business pays fixed rentals for the primary term and can then continue on a secondary period at nominal rent, or arrange the sale of the machinery and receive most of the proceeds. Finance lease is commonly used for larger machinery where the business does not require legal ownership but wants to use the asset long term.

Finance lease rental payments are fully deductible as a business expense against corporation tax. Capital allowances cannot be claimed by the lessee because legal ownership stays with the lender. Under FRS 102, finance leases must be recognised on the balance sheet as both an asset and a liability, which affects gearing ratios.

Refinance and sale and leaseback

Refinance allows businesses to borrow against machinery they already own. If a business has paid down most of the original finance agreement or purchased machinery outright, it can raise capital against the asset's current market value. The machinery secures the borrowing and the business repays over an agreed term.

Sale and leaseback is a specific refinance structure where the business sells the machinery to the lender at market value and simultaneously enters a lease agreement to continue using it. The business receives the full market value as cash and pays ongoing lease rentals. This is a useful tool for businesses that have accumulated unencumbered plant assets and need to release working capital without disposing of the machinery operationally. Portman Asset Finance and Time Finance both offer sale and leaseback on qualifying plant and machinery.

What machinery qualifies?

Plant and machinery finance covers a wide range of equipment. Agricultural machinery includes tractors, combine harvesters, sprayers, balers, telehandlers, irrigation systems and livestock handling equipment. Construction plant includes excavators, dumpers, bulldozers, cranes, concrete mixers, road planers and compaction equipment. Manufacturing and industrial equipment includes CNC machines, lathes, presses, moulding machines, laser cutters and production line equipment. Material handling includes forklifts, reach trucks, pallet stackers, conveyor systems and warehouse automation equipment.

Used and second-hand machinery is accepted by most specialist lenders. Portman Asset Finance, Close Brothers Asset Finance and Time Finance all finance used plant. The lender will assess the age, condition and secondary market value of the asset; very old or heavily worn machinery may attract lower loan-to-value ratios or be ineligible entirely. Machinery purchased at auction is also accepted by specialist lenders, with same-day decisions available for straightforward applications under £100,000.

How lenders assess machinery finance

Lenders assess machinery finance applications on three dimensions: the creditworthiness of the borrower, the value and condition of the asset, and the loan-to-value ratio requested. For standard applications on new machinery from an established supplier, the lender's primary focus is the borrower's credit profile and trading history. For used or unusual machinery, the asset assessment becomes more important and sector-specialist lenders with knowledge of secondary market values have an underwriting advantage.

Bank lenders including Shawbrook Bank and Close Brothers Asset Finance apply more rigorous credit criteria than specialist non-bank lenders, requiring a minimum of two years trading history and satisfactory filed accounts. Specialist lenders including Portman Asset Finance and Time Finance are more flexible, considering applications from businesses with shorter trading histories or non-standard credit profiles where the asset provides strong collateral.

The standard documentation for a machinery finance application includes: business bank statements for the last 6 to 12 months; the most recent two years of company accounts or self-assessment returns; details of the machinery including make, model, year, serial number and purchase price or independent valuation; a copy of the purchase invoice or auction receipt; and director identification. A director personal guarantee is standard for most SME facilities.

Machinery finance lenders

The following lenders are active in UK machinery finance. Close Brothers Asset Finance operates dedicated agriculture and manufacturing divisions with specialist underwriters who understand asset values and depreciation in each sector; maximum facility of £10,000,000. Shawbrook Bank finances hard assets including plant and machinery from £25,000 to £5,000,000; 24 to 48 hour decisions. Portman Asset Finance specialises in yellow plant, agricultural machinery and commercial vehicles from £5,000 with same-day decisions for sub-£100,000 applications. Aldermore Bank covers vehicles, plant and machinery from £5,000 with published indicative rates. Time Finance covers plant and machinery from £5,000 with same-day decisions and also offers invoice finance alongside asset finance.

For a full independent assessment of each lender including FCA FRN numbers, eligibility criteria, KT Score and product comparison, see the asset finance hub: Asset Finance UK: The Independent Guide.

Tax and capital allowances on machinery

The tax treatment of machinery finance is one of the most important factors in choosing a product structure. Under hire purchase, the business claims capital allowances on the full machinery cost from the date it enters use. The Annual Investment Allowance allows deduction of up to £1,000,000 of qualifying plant and machinery expenditure in a single tax year, providing immediate tax relief on most SME machinery purchases. Expenditure above the AIA limit falls into the main rate pool at 18 percent writing down allowance per year.

Under finance lease and operating lease, capital allowances are not available to the lessee. Instead, lease rentals are deducted as a business expense in the year they are paid. For businesses in a tax loss position or with fully utilised AIA capacity, finance lease can be more tax-efficient than hire purchase. HMRC's Business Income Manual at BIM45350 covers the deductibility of lease rentals.

Machinery classified as integral features of a building, such as fixed electrical systems or embedded plant, falls into the special rate pool at 6 percent writing down allowance rather than the main rate pool at 18 percent. Businesses should confirm the capital allowances classification of any machinery before selecting a finance product structure, and seek independent tax advice where the amounts are material.

Frequently asked questions

Can I finance second-hand or used machinery?

Yes. Most specialist asset finance lenders will finance used and second-hand machinery, including equipment purchased at auction. The lender assesses the age, condition and secondary market value of the machinery. Portman Asset Finance and Time Finance both specialise in used plant and can issue same-day decisions for straightforward applications. Bank lenders including Close Brothers Asset Finance also finance used machinery through their sector-specialist divisions. Age and condition limits apply; very old or heavily depreciated machinery may attract lower loan-to-value ratios.

How long can I spread machinery finance over?

Machinery finance terms typically run from 24 to 84 months. Shorter terms of 24 to 36 months are common for equipment with shorter useful lives or high depreciation rates. Longer terms of 60 to 84 months are available for large agricultural machinery, construction plant and industrial equipment with long working lives. The term affects the monthly payment but also the total interest cost; longer terms reduce monthly payments but increase total cost of credit.

Do I need a deposit for machinery finance?

A deposit is not always required but is common for used or older machinery where the lender wants to reduce its loan-to-value exposure. For new machinery from an approved dealer, many lenders will finance up to 100 percent of the purchase price with no deposit. For used machinery, a deposit of 10 to 25 percent of the purchase price may be required depending on the asset's age, condition and the borrower's credit profile.

What happens if the machinery breaks down during the finance agreement?

Under hire purchase, the business owns the risk of the machinery from the date it enters use. Breakdown and maintenance costs are the business's responsibility. Under finance lease and operating lease, the responsibility for maintenance depends on the lease terms; some operating leases include maintenance packages but most do not. All businesses financing machinery should carry appropriate engineering and breakdown insurance for the duration of the finance agreement.

Is machinery finance regulated by the FCA?

Machinery finance agreements with individuals and small partnerships under GBP25,000 are regulated credit agreements under the Consumer Credit Act 1974 and subject to FCA oversight. Business-to-business machinery finance above GBP25,000 is not a regulated credit agreement under the Act, but all lenders and brokers must hold FCA authorisation for credit broking. Authorisation can be verified at register.fca.org.uk.