Manufacturing businesses typically use asset finance and hire purchase to fund machinery and equipment, invoice finance to release cash tied up in unpaid trade invoices, and secured business loans to fund larger projects such as new premises, expansion or plant upgrades. These tools spread the cost of high-value capital items over their working life rather than draining cash reserves in one payment. Our comparison of secured loans for manufacturing businesses covers lenders that understand machinery and stock.
UK manufacturers face a distinct funding challenge: expensive equipment, long production cycles and customers who often pay on 30, 60 or even 90 day terms. That gap between spending on materials and getting paid, combined with the capital cost of plant, is why the sector leans heavily on finance structured around assets and receivables rather than simple overdrafts.
In short
- Asset finance and hire purchase are the most common routes for buying or refinancing machinery, CNC equipment, production lines and commercial vehicles.
- Invoice finance releases cash from unpaid sales invoices, easing the strain of long customer payment terms.
- Secured business loans suit larger, mixed-purpose projects such as factory fit-outs, expansion or acquiring a competitor.
- Lenders weigh trading history, turnover, order book strength, the resale value of any asset and the security available.
- Cost varies by business profile, asset type and security, so always confirm current rates and fees with the lender before committing.
What do manufacturing businesses use finance for?
Manufacturers use finance to bridge the gap between paying for capital and materials now and earning revenue from finished goods later, and to spread the cost of long-life equipment over the years it will be used.
- Buying new or used machinery such as CNC machines, lathes, presses, injection moulding and packaging lines.
- Refinancing existing plant to release cash back into the business.
- Funding raw materials and work in progress during long production runs.
- Covering the cash gap created by 30 to 90 day customer payment terms.
- Fitting out or expanding factory and warehouse space.
- Investing in automation, robotics or energy-efficient equipment to cut unit costs.
- Bridging seasonal demand or fulfilling a large one-off order that stretches working capital.
What finance options suit manufacturing businesses?
The best fit depends on what you are funding: use asset finance or hire purchase for machinery and vehicles, invoice finance to unlock cash from your sales ledger, and a secured business loan for larger or mixed-purpose projects. Many manufacturers run more than one facility at once, for example hire purchase on a machine alongside invoice finance on their receivables. Our guide to asset finance vs a secured loan for equipment explains when each one works out cheaper.
Asset finance
Spreads the cost of machinery and equipment over its working life, with the asset itself typically providing the security.
Learn more →Hire purchase
Lets you buy plant and vehicles in instalments and own the asset outright at the end of the agreement.
Learn more →Invoice finance
Releases cash tied up in unpaid trade invoices, smoothing the strain of long customer payment terms.
Learn more →Secured business loans
Funds larger, mixed-purpose projects such as expansion, premises or acquisitions using business or personal assets as security.
Learn more →How do manufacturing businesses fund growth? Two examples
Replacing a production line with hire purchase
A metal fabrication firm needs a new CNC machining centre to take on larger contracts but does not want to spend a six-figure sum from reserves. Using hire purchase, the business pays a deposit and spreads the balance over an agreed term, owning the machine outright at the end. The new capacity lets it quote for bigger orders while payments are matched to the extra revenue the machine generates. Rates and terms depend on the machine’s age, resale value and the firm’s trading record, so current figures should be confirmed with the lender.
Bridging long payment terms with invoice finance
A plastics manufacturer supplies large retailers that pay on 75 day terms, leaving cash locked in the sales ledger while wages and material bills fall due weekly. With invoice finance, the business draws a percentage of each invoice’s value shortly after raising it, rather than waiting months for payment. This keeps production running and lets the firm buy materials for the next order without an overdraft. The facility grows as turnover grows, and costs vary by ledger size and customer quality, so the lender should confirm the current terms.
What do lenders look at for manufacturing businesses?
Lenders assess whether the business can comfortably meet repayments and, where relevant, what security or asset value sits behind the facility. For manufacturers, the strength of the order book and the resale value of equipment often matter as much as historic accounts.
- Trading history: most lenders prefer two or more years of accounts, though options exist for younger firms with strong assets or contracts.
- Turnover and profitability: consistent revenue and margins reassure lenders that repayments are affordable.
- Order book and contracts: a healthy pipeline of confirmed work supports affordability, particularly for growth funding.
- Asset value and resale market: for asset finance and hire purchase, the make, age and secondhand demand for the equipment influence how much can be advanced.
- Sales ledger quality: for invoice finance, lenders look at your customers’ creditworthiness and how concentrated your sales are among a few buyers.
- Security: secured loans require business or personal assets, and the equity available affects how much you can borrow.
- Sector and customer risk: reliance on one large customer or a volatile export market can affect terms.
Cost is driven by your overall profile, the asset or security involved and market conditions, so treat any figures as indicative and confirm current rates and fees directly with the lender.
What should you weigh up?
- Match the term to the asset: financing a machine over a term far shorter or longer than its useful life can strain cash flow or leave you paying for equipment past its prime.
- New versus used equipment: secondhand machinery can be cheaper to buy but may attract different finance terms because of resale value and expected life.
- Total cost, not just the monthly figure: compare the full amount repayable, arrangement fees, and any end-of-term or option-to-purchase charges.
- Customer concentration: if one buyer dominates your sales, invoice finance terms and limits may be affected, so check how the lender treats concentration.
- Personal guarantees and security: understand exactly what you are pledging and the implications before signing.
- Flexibility: check early settlement terms, whether facilities can scale with turnover, and how usage or interest rate changes could affect payments.
- Maintenance and downtime: factor servicing and the cost of production stoppages into your affordability sums, not just the finance repayment.
How Greenwood helps
Greenwood Capital is a Manchester-based, whole-of-market finance broker that specialises in secured business loans and works across the wider lending market for manufacturers. Rather than approaching a single lender, we compare options from across the market and match them to your situation, whether that is asset finance for a new production line, invoice finance to ease payment terms, or a secured loan for a bigger project. This is general help to inform your decision, not financial advice. Explore our Compare Lenders hub to see how different providers stack up, then let us do the legwork of finding the routes that fit your business.