Plant finance key to cashflow in difficult trading conditions

The credit crisis has choked demand for construction equipment and the government needs to sort out the financial institutions, according to Rob Oliver, chief executive of the CEA, which represents plant manufacturers.

"Until the banks feel able to lend on a normal commercial basis again, the government is trying to inflate a punctured balloon," he said.

However, Nigel Greenaway of JCB Finance said manufacturer-related financing for plant could be a much better bet for contractors and plant hirers.

He said: "The fortunes of manufacturer-backed finance houses are intrinsically linked to the success of the construction industry, so they are better placed to help their plant customers.

"Dedicated plant finance companies have a track record in the construction industry, understand the equipment used, and will do their best to help during the bad times as well as the good.

"After all, they're sharing the same bath water with their customers and will try their best to avoid pulling the plug during the bad times."

In these uncertain times, Greenaway said contractors should consider using specialist plant financiers for large capital expenditure, as it preserves vital working capital and can even inject much-needed cash into the business.

He gave the example of possibly refinancing owned plant on a sale-and-leaseback basis, or releasing cash from plant nearing the end of existing finance agreements by refinancing for a further year.

"While other financial institutions may take a charge on property or ask for personal guarantees, the security of such deals with manufacturer-linked finance is the plant itself," Greenaway concluded.