7 min read read
Growth consumes cash in ways that aren't always visible on the equipment invoice — more stock to hold, staff to recruit and train ahead of the revenue they generate, and a general need for headroom when customers pay late. Spending a large lump sum on equipment when growth is exactly the moment cash needs to be flexible can quietly slow a business down.
The situation
This comes up most often when an SME wins a larger contract, opens a second site, or simply reaches the point where existing equipment can't keep up with order volume. The equipment itself — machinery, vehicles, IT systems, catering or workshop kit — might be £20,000-£150,000, an amount the business could technically pay from reserves, but doing so removes the buffer that growth itself needs.
What tends to go wrong
- Paying cash for equipment and then needing a working capital loan a few months later on less favourable terms because reserves are depleted
- Assuming finance is only for businesses that can't afford to pay cash, rather than a deliberate way of allocating capital
- Financing equipment on a term that's shorter than sensible purely out of a wish to 'own it outright' quickly, when a longer term frees up more monthly cash for growth
- Not separating equipment finance from any working capital facility, making it harder to see true cost of borrowing across the business
How we would structure it
Hire purchase or finance lease against the specific equipment being bought is usually the most straightforward route, keeping the facility tied to an asset the lender can see and value, generally on better terms than unsecured working capital borrowing. Where the need is genuinely for cash rather than a specific asset — for example, funding stock ahead of a seasonal peak — a secured business loan or refinancing equipment already owned can release working capital without touching cash reserves at all.
| Need | Typical structure |
|---|---|
| New equipment for growth | Hire purchase or finance lease |
| Cash for stock, staff or working capital | Secured business loan or refinance |
| Software or fit-out for expansion | Soft asset / technology finance |
Worked example
Illustrative equipment purchase decision
- Equipment cost
- £65,000
- Cash reserves before purchase
- £90,000
- Structure chosen
- Hire purchase, 5 years, deposit £6,500
- Monthly payment (illustrative)
- £1,140
- Cash reserves retained
- £83,500
Figures are illustrative only and depend on rate, deposit and underwriting at the time.
What to have ready
- Latest accounts or, for newer businesses, management figures and bank statements
- A quote or specification for the equipment in question
- A short view of what the cash being preserved would otherwise fund
- Details of any existing borrowing, including overdraft and loan facilities
If you're weighing up paying cash against financing an equipment purchase, it's worth talking it through with us and your accountant together — the right answer depends on what else that cash needs to do over the next twelve months.
Next step
Talk through the numbers with us
Send us the details of the asset and we will come back with an indicative figure and a properly structured option from the funder panel. No obligation, and no pressure to proceed.