Engineering business finance

Which finance fits an engineering business

Precision engineers, fabricators, machine shops and subcontract engineering firms are capex-heavy, so finance tends to follow the equipment. Asset finance spreads the cost of CNC machines, presses and machine tools over the years they earn, while asset refinance releases equity trapped in plant that is already owned and turns it into working capital. Where the receivables are with creditworthy B2B customers, invoice finance funds the gap between despatch and payment, and a commercial mortgage suits an owner-occupied workshop or unit.

The cashflow problem in engineering

Engineering cashflow is order-led and project-based. Materials, consumables and machine time are committed weeks before a stage or completion invoice is raised, and many customers run 60 to 90 day terms, so cash goes out long before it comes back. Capacity expansion then arrives in lumps, with a single machine tool representing a large, one-off outlay. Matching asset finance to the kit and invoice finance to the receivables keeps repayments aligned with the cash each activity actually generates.

What lenders weigh, and what to do next

Lenders look at how concentrated the order book is on one or two original-equipment manufacturers, how cyclical the end markets are, the age and resale value of the plant, and how steel and raw-material price swings affect margins. Customer concentration and aged valuations are the usual sticking points, which is where asset specialists and challenger banks such as Aldermore and Allica Bank come in. If steel-price volatility or a single-buyer squeeze has triggered a decline, the engineering decline routing sets out the alternatives. Run the eligibility checker to be matched on your plant and order book.