Finance for Electrical Engineering Equipment

There are many new challenges for the electrical engineering and manufacturing sector. Eco-design means you will have to comply with legal requirements such as the Restriction of the Use of Certain Hazardous Substances in Electrical and Electronic Equipment Regulations, the Waste Electrical and Electronic Equipment Regulations and the European Union Energy-related Products Directive.

Increased pressure from customers, legislators and the supply chain for products that have less impact on the environment is another.

Hazardous materials will have to be engineered out. New production processes - and costly new equipment - may become essential. You may need to re-equip your entire production operation. But if you can find the necessary finance, it could let you build a business producing better products, with reduced costs and clear marketing advantage.

At Rangewell, we know the challenges you and your Electrical Equipment production operation faces - and we know the financial solutions that can help you solve them, and build a better, leaner, more ecological and more profitable business.

However, this can help you to cut costs, innovate and gain a marketing advantage.

Your funding options

The costs start with product development but will escalate as you move into the production phase. You will need to have every production asset - from winders and jigs to conveyors and handling equipment - in place before production can begin. You may be able to set up a basic assembly-based manufacturing business with basic tools, but a fully automated volume line will cost several million pounds.

Only the largest electrical engineering operations have the cash reserves to equip a full production operation outright.

Fortunately, there is a range of funding options that can help you finance the equipment you need:

• Asset Finance
• Mezzanine Finance
• Borrowing
• Commercial Mortgage

Asset Finance

Asset Finance is a blanket term for Hire Purchase and Leasing. when you want to finance new assets, these solutions can help you acquire virtually any type of production equipment.

Hire Purchase – buying your production equipment

Hire Purchase offers a straightforward way to spread the cost of equipping your production operation ver up to five years. You will need to put down a deposit, typically between 5%-25% of the total price, and repay the remainder, together with the interest, over an agreed period of up to 60 months. You pay a fixed rate of interest and agreed monthly payments, making budgeting simple. Lower cost items and  basic tools such as pillar drills may be suitable for hire purchase

You may also have the option to structure your payments to fit your projected cash flow. For example, you can secure lower monthly repayments by agreeing to pay a final lump sum, known as a balloon payment, at the end of the loan period. This will mean that your equipment has had sufficient time to generate the funds to pay for itself when your production is fully operational.

Pay less than with suppliers' finance

Equipment manufacturers and dealers will often offer HP arrangements. These can sound very attractive, and can even include 0% options. While these can look attractive, at Rangewell we have found that there can actually be hidden costs. You may be able to save money by arranging finance yourself.

See how we can help you beat 0% finance deals.

Leases – avoiding capital costs

With a lease, your production equipment is rented to you by the finance company, and you effectively hire it for the period of the agreement. It remains their property, avoiding the need for capital expenditure. You may also be able to choose a lease that gives maintenance and repair responsibilities back to the finance company.

Monthly payments and interest rates are fixed for the duration of the contract, and you can pay for your equipment from the income it generates each month.

When production equipment becomes obsolete because new technology is available or your production process changes, you can simply return it to the finance house at the end of the lease. This makes it simpler to adopt the latest technology - helping your business maintain a competitive edge.

Asset Refinance

An Asset Refinance agreement can let you release the investment you have already made in existing equipment, and re-use the funds elsewhere in your business.

It works by letting you sell existing assets to a finance company, who will provide you with a cash payment which you can use as you wish. You will then make monthly repayments to buy them back.

You can continue to use the equipment while you are repaying. You can also use Asset Refinance to replace an existing funding agreement - allowing you to reduce monthly outgoings.

Find out more about Asset Refinance.

Mezzanine Funding

To acquire a complete factory or fund a new volume production line, you may need a scale of funding that many lenders will simply not be able to provide.

Equity funding could be one way to provide the scale of funding required. There are no repayments to make, because you are selling a share in your business. However, it will mean sharing all future profits with your investors, and could mean losing control of your business. Mezzanine Finance can provide a solution. A lender will provide the funds you need, secured on the future of your business.

This means that they will offer a high level of funding, but you will need to repay their debt and interest charges - if you fail to repay, they will have the right to take an agreed proportion of equity interest in the company.

Find out more about how Mezzanine Finance can offer a high level of funding.

Borrowing

You may also be able to simply borrow funding for individual machines. Lending can provide a cost-effective solution in some circumstances - talking to a Rangewell expert will help you understand what they are.

There are two types of basic business lending, which can be used for any business purpose and can provide a simple way to funding for all types of business expenses. Unsecured business loans can be suitable for smaller items and usually allow you up to 5 years to repay.

Secured loans are ‘secured’ because the lender will require security in case you cannot pay the loan back. This could be your home or your business premises. They can be used to borrow large sums, and payback can be arranged over 10 years or more. Because security reduces the risk for lenders, interest rates tend to be significantly lower than unsecured lending.

Using a Commercial Mortgage to raise funds

If you own your factory or other business premises you may be able to use them to raise the funding you need for a production facility. By taking out a Commercial Mortgage on the property, you can raise a large sum which you can use for any business purpose. Repayments can be over 20 years or more.

Find out more about raising funds with a Commercial Mortgage.

How we help you capitalise electrical manufacturing

At Rangewell, we work across the entire lending industry, and our finance experts have personal experience of different business sectors. Our experience across the manufacturing industry works for you. Our team knows the lenders who specialise in finance for production machinery, and those who understand the electrical engineering business sector. It means that we can help you find the most competitive rates for all types of finance solutions.

We put this knowledge to work for you, finding the most competitive deals for the equipment you need, from a single machine to a complete line.

As well as conventional construction funding products, we can help you find Alternative Funding, using new loan providers and styles of funding. We know the lenders who can offer the most competitive rates for the sector. Whether you have a straightforward finance need, or require a complicated ‘Jigsaw’ funding plan made up of a combination of lending types, we have the answers you need.

Simply call us now to find out more.