Business funding for manufacturers

A manufacturer borrows for two things: the machines that make the product, and the cash tied up in materials and work in progress before the customer pays. Asset finance funds the first against the machine itself, and invoice finance, trade finance or a revolving facility funds the second.

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What manufacturers borrow for

A machine shop, a food producer and a furniture maker share one problem: the money goes out long before it comes back. Raw materials are bought and paid for, turned into work in progress, finished, shipped and invoiced, and only then does the customer’s payment period start. The longer that chain, the more working capital the business needs to grow, because each new order is paid for before it is paid.

The second call on cash is equipment. A CNC machine, a packing line, a press or a robot cell can cost more than a year’s profit, and it earns its return over several years of output. Paying for it from cash drains the money needed for materials, so manufacturers match long-lived kit with finance repaid over its working life.

Growth adds more: a bigger unit, a second shift, an export order with a long shipping time, or a large customer that wants long payment terms. The Small Business Protections Bill would cap the terms large firms can impose on smaller suppliers at 60 days once it is law. A lender will check that each need is matched to the right product, because an overdraft used to buy a machine, or a five-year loan used for stock, is the mismatch a credit analyst looks for first.

The cash cycle in a factory

  1. 1

    Buy materials

    You pay suppliers on their terms, or up front if you are new to them or buying from overseas. Trade finance can pay the supplier for you and give you time to sell before you repay.

  2. 2

    Make the product

    Labour, energy and machine time turn materials into work in progress. None of it can be invoiced yet, and lenders find half-made goods hard to lend against.

  3. 3

    Ship and invoice

    Once the goods are delivered and invoiced, the debt can be funded. Invoice discounting advances a share of each invoice and leaves credit control with you.

  4. 4

    Get paid

    The customer pays at the end of its terms. The cash cycle calculator measures the gap in days and the cash it ties up.

Tax relief on new plant and machinery

Full expensing
A company can deduct 100% of the cost of new, unused main pool plant and machinery from its taxable profits in the year it buys it. The Budget on 28 October 2026 kept it.
Annual investment allowance
Up to £1 million a year of qualifying plant and machinery, new or used, deducted in full, for companies, sole traders and partnerships.
First year allowance
40% of the cost of qualifying main pool plant bought from 1 January 2026, rising to 50% for spending on or after 1 January 2027 under the October 2026 Budget.
Writing down allowance
The main pool rate fell from 18% to 14% in April 2026 and falls to 12% from 1 April 2027 for companies.

Plant bought on hire purchase qualifies for capital allowances when it comes into use, so the tax relief can arrive years before the last payment. Under a lease the leasing company owns the asset and claims the allowances, and your rentals are a cost in your accounts.

A £400,000 machine on hire purchase

Illustrative example

A manufacturing company buys a new machine for £400,000 plus VAT. It pays an assumed 10% deposit and finances the rest over five years at an assumed 8% a year, in equal monthly payments. It pays corporation tax at 25% and has the profits to use full expensing.

Machine cost before VAT
£400,000
Deposit at the assumed 10%
£40,000
Amount financed
£360,000
Monthly payment over 60 months at the assumed 8%
£7,299.50
Total interest over the five years
£77,970
Corporation tax saved in year one through full expensing (£400,000 at 25%)
£100,000

The first-year tax saving of £100,000 is larger than the first year of payments, £87,594, and the interest is a deductible cost on top. The VAT on the machine is reclaimed on your VAT return.

The Made Smarter adoption programme

Made Smarter helps small and medium-sized manufacturers adopt digital technology. Its adoption programme is open to SME manufacturing and engineering businesses with manufacturing premises in England and is run region by region, so what is on offer depends on the postcode of your main site. Regional programmes offer specialist advice, a digital action plan, leadership training and match-funded grants of up to £20,000 towards hardware and software, depending on the region.

A grant of that size will not buy a production line, but it changes the sums on machine monitoring sensors, scheduling software or a vision inspection system. You pay your share of a match-funded project, and asset finance can cover it. Manufacturers in Scotland, Wales and Northern Ireland should look at the Scottish, Welsh and Northern Irish grant pages.

A server handing a takeaway order to a customer

What a lender looks at in a factory

A lender reads a manufacturer’s accounts for gross margin first, and for how it moved when material and energy costs rose. A business that passed cost increases on to its customers reads as stronger than one that absorbed them. Customer concentration comes next: if one customer takes a large share of output, expect questions about the contract, its notice period and that customer’s own credit.

Stock gets close attention. Raw materials can be valued and sold, but work in progress and bespoke finished goods are worth little to anyone else, so a lender may discount them heavily. Machines are judged on what they would fetch second-hand. Bring an aged debtor and creditor list, a stock report split into raw materials, work in progress and finished goods, a plant list with ages and values, and a forecast showing the cash effect of orders you have won.

Products that fit a manufacturer

Asset financeInvoice financeTrade finance
FundsMachines, vehicles and equipmentInvoices you have issuedPurchases from suppliers
SecurityThe asset itselfThe invoices and the customers who owe themThe goods bought and their sale
Repaid fromMonthly payments over the asset’s lifeCustomer payments as they arriveThe proceeds when the goods sell
Grows with salesNoYesYes, deal by deal

A business that owns its unit can raise a commercial mortgage on it, and one buying a supplier or competitor can use acquisition finance. The Growth Guarantee Scheme, which the October 2026 Budget expanded by £6.5 billion of lending, gives a lender a partial government guarantee on a loan.

Asset finance calculator

The monthly payment on equipment or vehicle finance with a deposit and a balloon payment, and what the finance costs in total.

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Questions people ask

What finance is available for manufacturing businesses?

Asset finance and hire purchase for machinery and vehicles, invoice discounting or factoring against customer invoices, trade finance for supplier payments, revolving credit facilities and term loans for working capital, and commercial mortgages for premises. A funding search through Swoop compares lenders across these products for limited companies and LLPs, and for sole traders and partnerships borrowing more than £25,000.

Can I get a grant for new machinery?

In England, the Made Smarter adoption programme offers match-funded grants of up to £20,000 towards digital hardware and software for small and medium-sized manufacturers, depending on your region. Larger machinery is funded by finance, with tax relief through full expensing or the annual investment allowance. Grants in Scotland, Wales and Northern Ireland are run by the devolved governments and their agencies.

Should I lease or buy machinery?

Buying outright or on hire purchase means you own the machine and claim the capital allowances, including full expensing for a company buying new main pool plant. Leasing means the leasing company owns it and claims the allowances, and you deduct the rentals. A machine you expect to keep for its whole life suits ownership. Kit you will replace as technology moves on can suit a lease.

Does hire purchase qualify for full expensing?

Yes. Under hire purchase the company is treated as owning the machine for capital allowances, and can claim when the machine comes into use, even though it has not finished paying for it. The machine must be new and unused main pool plant for full expensing. Used machinery can fall under the annual investment allowance of up to £1 million a year.

Finance is subject to status and to the lender’s terms. A personal guarantee makes you liable for the company’s debt if it does not repay, and it can be enforced against your own assets, including your home. Nothing here is a personal recommendation.

Funding by sector

Asset finance

Asset finance spreads the cost of equipment, vehicles and machinery over the years you use them, with the asset as the funder’s security.

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Plant and machinery finance

Plant and machinery finance pays for excavators, tractors and machine tools, new or used, over their working life.

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Invoice discounting

Borrowing against your sales ledger while you keep your own credit control.

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Trade finance

Finance that pays your suppliers for stock and imports, repaid when the goods are sold.

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All business funding

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Funding searches run on Swoop’s platform. Swoop Finance Limited is a credit broker and not a lender, and is authorised and regulated by the Financial Conduct Authority (FRN 936513). Buzz Accounting Ltd introduces businesses to Swoop and may receive a fee from Swoop when funding is arranged. Business funding is separate from the financial advice Equity & General Financial Services Limited gives through this website. Finance is subject to status, and a lender may ask a director for a personal guarantee.

Cover for a personal guarantee

If a lender asks you to guarantee the company’s borrowing, our advisers can advise on life cover for that debt.

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