Why this matters: when you buy machinery the VAT is usually payable immediately, creating a cashflow gap even if you will reclaim VAT later. That gap is what specialised VAT loans or finance packages are designed to bridge.

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VAT on manufacturing equipment: quick primer

When you buy capital equipment (CNC machines, presses, industrial ovens, etc.) VAT is normally charged by the supplier at the point of sale. If your company is VAT-registered you’ll typically reclaim VAT on your next VAT return, subject to HMRC rules about business use, partial exemption and any special schemes (for example the second-hand margin scheme).

Two consequences:

• You must find the cash to pay the full purchase invoice (including VAT) at delivery.
• You can usually reclaim the VAT later — but reclaim timing depends on your VAT return schedule and HMRC processing.

For precise tax rules consult HMRC’s VAT guidance: GOV.UK – VAT or your accountant.

Two distinct needs: paying VAT now vs reclaiming VAT later

It helps to separate two different cashflow problems:

• Immediate VAT payment: you need cash for the VAT portion at the point of purchase.
• Net asset funding: funding the VAT-exclusive price of the equipment (the capital cost after reclaim).

Different products solve each problem. VAT bridging loans or short-term VAT facilities focus on the first. Asset finance, hire purchase or leasing generally fund the net cost and sometimes structure VAT into monthly payments.

Funding options manufacturers use for VAT on machinery

VAT loans / VAT bridging finance

What they are: short-term facilities to cover the VAT amount on a purchase until VAT is reclaimed. Offered by specialist lenders and finance houses, often as bridging loans or short-term unsecured/secured lines.

Typical features:

• Term: commonly 30–180 days (sometimes up to 12 months).
• Cost: interest plus arrangement fees; rates vary by lender and credit profile.
• Security: may be unsecured for small amounts but often secured against the asset or via a director guarantee for larger sums.

Asset finance / hire purchase and leasing

Asset finance can be structured so VAT is included in repayments, or the supplier may invoice VAT on each rental instalment (which can be reclaimed). This smooths cashflow and can remove the need for a separate VAT loan.

Invoice finance / factoring

If you have outstanding customer invoices you can unlock cash from sales to pay VAT. This is often faster than a loan and useful for manufacturers with long payment terms from customers.

HMRC VAT arrangements or payment plans

HMRC can sometimes agree payment arrangements — especially where businesses are experiencing short-term cashflow issues. These are not loans but deferred payment agreements; eligibility and terms depend on your circumstances. Check GOV.UK for current HMRC options.

Traditional options

Overdrafts, short-term business loans, vendor (supplier) finance and business credit cards are other ways businesses fund the VAT element. All have different costs and limits.

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How lenders and brokers evaluate VAT funding requests

Specialist lenders and brokers will typically assess:

• Business type and sector (manufacturing experience is a plus).
• Turnover and trading history (often 12+ months preferred).
• VAT registration status and recent VAT returns.
• Copies of the supplier invoice or quote for the machinery.
• Management accounts, bank statements and cashflow forecasts.
• Credit history and any existing security (charges, guarantees).

Turnaround is often fast — from a few hours to a few working days — when full documents are provided.

Typical costs, terms and risks — what to expect

Costs depend on product and risk. Expect some or all of the following:

• Interest rates (often higher for short-term VAT bridging than for longer-term asset finance).
• Arrangement or facility fees — set-up and legal fees for secured facilities.
• Early repayment fees depending on contract terms.
• Security: lenders may require a charge over the asset or personal guarantees from directors.

Risks to watch:

• Using personal guarantees can put personal assets at risk.
• Short-term borrowing with high fees can be expensive if the VAT reclaim is delayed.
• Not all lenders will accept all industries or credit profiles.

Representative costs vary by lender — exact terms will be provided once lenders assess your application.

Why use UK Business Loans to find VAT funding for manufacturing equipment?

UK Business Loans does not lend. We introduce manufacturers to lenders and brokers who specialise in VAT funding and equipment finance. Our advantages:

• Speed: one short enquiry connects you to multiple potential partners.
• Sector focus: we match you to partners experienced in manufacturing finance.
• Free and no obligation: our service costs you nothing to get matched.
• Confidential: we only share details with selected lenders/brokers who can help.

1. Start your enquiry (2 minutes).
2. We match you to lenders/brokers.
3. Receive quotes and choose the best fit.

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Short case examples

Example A — CNC machine VAT bridging

An SME ordered a £90,000 CNC machine plus £18,000 VAT. They expected to reclaim VAT on their next quarterly return in 6 weeks but needed cash at delivery. A specialist short-term VAT facility covered the £18,000 for 60 days at an agreed fee; the business reclaimed the VAT and repaid the facility without affecting their longer-term asset finance deal.

Example B — Hire purchase to spread VAT

A medium-sized manufacturer used hire purchase where VAT was payable on each instalment. This spread the VAT burden over the repayment term, smoothing cashflow and tying funding to the asset’s useful life.

How to prepare before you apply

Gather key documents to speed the process:

• Supplier invoice/quote (essential)
• VAT registration details and recent VAT returns
• Bank statements (6–12 months)
• Latest management accounts and a brief explanation of asset use

Tip: include the supplier contact and delivery schedule in your enquiry to help lenders price the facility accurately.

FAQs

Does UK Business Loans lend directly?

No. We are an introducer — we match you to lenders and brokers who may offer VAT loans, hire purchase, leasing or other finance solutions.

Can I get a VAT loan if I’m not VAT-registered?

VAT loans usually assume VAT registration because the VAT element is reclaimable. If you are not registered, lenders may propose alternative funding such as short-term business loans or asset-backed finance.

Will enquiring affect our credit score?

Submitting an enquiry through UK Business Loans does not affect your credit score. Lenders may perform credit checks later in the application process.

Should I accept an HMRC VAT deferral if offered?

HMRC payment arrangements can help but consider the terms and whether a short-term lender would offer more suitable flexibility. Speak to your accountant or a broker to compare options.

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Compliance & important disclosures

UK Business Loans is an introducer. We do not lend and we do not provide regulated financial advice. We connect you — free of charge — with lenders and brokers who can help with VAT funding and equipment finance. Completing an enquiry is free and has no obligation; it won’t affect your credit score.

We recommend checking any lender’s credentials and seeking independent tax or accounting advice for VAT-specific questions. Authoritative guidance on VAT is available from HMRC: GOV.UK VAT. For general rules on financial promotions see the FCA: FCA.

Next step: get your free quote now

Ready to see which lenders or brokers can help fund the VAT on your new machine? Complete a short enquiry and we’ll match you with partners who specialise in manufacturing finance.

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Your details are confidential and will be shared only with selected lenders and brokers who may be able to help. We are an introducer — not a lender.