Business Loans for Engineering Firms

What is a business loan for engineering firms?

A business loan for an engineering firm is a type of financing that helps you cover the high costs associated with your business. Engineering is an expensive business to run, with high machinery costs, expensive materials, and skilled staff wages depleting your working capital. On top of these costs, the nature of engineering means jobs are often paid in stages, or you have to wait for long invoice terms. This means that the money coming in doesn’t always match the money leaving your business.

A business loan helps you close that financial gap. These loans are typically given in a lump sum, which you repay in fixed monthly instalments.

Compare small business loans to see your eligible options.

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6 reasons engineering firms might need finance

Although every firm is different, you likely face similar financial challenges. Here are some of the most common reasons engineering business owners look for finance:

1. Buying or upgrading machinery and equipment

Machinery and equipment are expensive, so whether you need a new CAD printer, laser cutter, or heavy-duty CNC machines, instead of footing the full cost upfront, you can spread the cost and keep money in your bank.

2. Managing working capital

Your fixed monthly expenses always need paying, but customers might not pay your invoices immediately. A loan gives you the cash injection needed to make sure you can pay all those expenses every month without waiting for invoice payments to arrive.

3. Hiring skilled engineers

Although hiring skilled engineers is essential to the longevity of your business, the initial outlay can be costly. It’s not just their salaries you have to consider, either; it’s the cost of recruitment and training, too. A loan helps you invest in your team without draining your bank balance.

4. Winning bigger contracts

Winning a big new contract is exciting; it could mean significant growth for your business. But bigger contracts mean more materials, hiring more people, all before your first payment arrives. Funding helps you grab those opportunities with both hands, without worrying about the cash needed to complete them.

5. Bridging the gap between jobs

If you experience quieter periods between contracts, a loan can remove the short-term financial stress.

6. Premises and expansion

With a loan, you don’t need to put expansion plans on hold; you can confidently scale your operations without severely depleting your cash reserves.

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How to spend your engineering loan

Once you have the funds in your bank account, you can spend them on anything business-related. But here are a few ways firms are spending their engineering business funding:

• Machinery and plant: CNC machines, presses, welding and fabrication equipment, and specialist tools.
• Vehicles: vans, site vehicles, and trucks.
• Working capital: page wages, supplier invoices, project materials, and overheads during quieter months or if you’re waiting for customers to pay.
• Hiring and training: recruiting skilled engineers or paying for training and qualification costs.
• Tech and software: CAD packages, design and simulation software, and project management system subscriptions.
• Materials and stock: purchasing materials in bulk to access discounts ahead of big contracts.
• Premises: upgrading workshops, building new units, or storage.

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Types of engineering business loans

There are several types of professional loans for engineering firms. The type that suits your business most will depend on what you want to use the money for and how you’d like to repay.

Small business loans

A small business loan gives you a lump sum that you repay over fixed monthly instalments over a pre-agreed term. Small business loans can help you purchase materials or hire skilled workers and can be either unsecured or secured. If you want funds quickly, an unsecured loan can be in your bank account in as little as 24-48 hours. And if you want to access higher loan amounts, you can apply for a secured small business loan.

Asset finance

Your sector depends on expensive equipment, so asset finance can be very valuable to engineering firms. Instead of purchasing your machinery or equipment outright, you can use asset finance or equipment financing to spread the cost over time through a hire purchase or lease agreement. This keeps cash in your business while giving you access to top-end equipment and machinery to complete projects to a high standard.

Asset refinancing

If you already own valuable assets like plant, machinery, or vehicles, you can use asset refinancing to release cash tied up in them. You borrow against your asset, freeing up money to use elsewhere in your business. This means you keep hold of your asset and enjoy a cash infusion.

Bridging and short-term loans

If you’re waiting on a customer payment and you need to pay a supplier before this payment lands, a bridging or short-term loan can help you access fast funding to plug this temporary financial gap.

Invoice finance

If cash flow is your main problem, invoice finance could be a better option than a standard business loan. Invoice finance helps you access up to 95% of the unpaid invoice total immediately, instead of waiting the full payment term. So if you have long invoice payment terms and credit-worthy business customers, invoice finance is a great way to keep cash flow healthy.

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Which engineering specialties can apply?

If you work in the engineering sector, you can apply, which includes:

• Mechanical engineering
• Electrical engineering
• Civil and structural engineering
• Manufacturing engineering
• Specialist and precision engineering

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Am I eligible for an engineering business loan?

Although eligibility varies between lenders, most have the same basic requirements. They’re looking for UK-based businesses with a trading history and a clear plan of how you’ll use and repay the money. Lenders don’t just typically focus on your credit score (although we do offer specific bad credit loans); they’ll look at your business’s performance as a whole.

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How Capalona can help

Finding the right financing for your firm doesn’t have to be a long, drawn-out process. Our free business loan comparison tool is self-serve, making it easy for you to compare and apply for a loan to support your growth.

We connect you with our panel of trusted UK lenders based on your circumstances. All you need to do is tell us what you’re looking for, then you can compare lenders and products at your leisure, compare total repayable, interest rates, and more, all without affecting your credit score.

Ready to find the right finance? Compare engineering loans.