An established UK limited construction company can refinance owned or part-financed plant to release working capital while keeping the equipment in use. The lender values each machine, applies its own lending basis, clears any existing settlement and deducts fees; only the remainder reaches the business. The deal works when title is clear, the plant is saleable and trading cashflow can service repayments before the new contract pays.
Start with the net release, not the yard value
The contractor sees what the excavator cost, what a dealer might advertise it for and what it would cost to replace. A refinancing lender asks a narrower question: what could this machine realise within the lender's expected disposal process if the agreement failed?
That figure may be described as open-market value, orderly-sale value, forced-sale value or recovery value. The terms are not interchangeable. A credit proposal should state which basis the lender is using, whether the valuation includes attachments and whether VAT is included. A percentage that looks generous against a conservative recovery value can produce less cash than a lower percentage applied to a sound open-market valuation.
The calculation is:
| Step | Calculation | What to verify | |---|---|---| | Accepted asset value | The lender's value for eligible plant, not original cost or insurance value | Valuation basis, inspection date, VAT treatment and whether buckets, forks or other attachments are included | | Gross advance | Accepted value × the lender's agreed funding percentage | The percentage applies only to eligible assets and is not a promise against the whole asset register | | Less existing finance | Current settlement figure, including any settlement charge | The figure must be valid on the proposed completion date | | Less transaction costs | Valuation, documentation, legal, registration or other stated fees | Which costs are paid separately and which are deducted from the advance | | Net working capital | Gross advance − settlement − deducted costs | The amount available for mobilisation, materials, payroll or another stated business purpose |
The original invoice price does not appear in that formula except as evidence of title and asset history. Construction plant depreciates through age, hours, condition and model demand. An excavator bought for £160,000 several years ago is not £160,000 of collateral today; equally, a well-maintained mainstream machine with a deep used market may support a clearer valuation than a newer, highly specialised attachment with few buyers.
Owned outright, still on finance or no equity left
The words "our plant" do not establish what can be refinanced. The asset register may include equipment held under hire purchase or lease, while kit routinely used by the company may be hired in or cross-hired from somebody else.
| Position today | How the transaction can work | Cash released | |---|---|---| | Owned outright with clear title | The lender documents a refinance against the asset. Depending on the structure, it may take security over the plant or acquire it and provide its continued use under a new hire-purchase or lease agreement. | Gross advance less fees and any required reserves | | Hire purchase or another agreement remains | The incoming lender obtains a formal settlement, pays the existing financier and completes the new agreement once title and priority can be transferred cleanly. | Gross advance less settlement and fees | | Settlement leaves little equity | A refinance may still replace the agreement, but there may be too little surplus to solve the working-capital need. | Small or nil net release | | Settlement exceeds supportable value | The plant is in negative equity. More collateral, cash from the company or a different facility would be needed; refinancing that machine alone cannot manufacture equity. | Nil unless the shortfall is covered elsewhere | | Hired, cross-hired or owned by another group company | The trading company cannot grant rights it does not have. The legal owner and any existing lender must be identified, and a group-company transaction may need separate security and guarantees. | Case-specific; often paused until ownership is resolved |
Ask for settlement letters early. A balance shown in the last accounts is not a completion figure, and a monthly payment schedule does not reveal a final purchase option, arrears, early-settlement cost or cross-default affecting other machines.
How contract mobilisation and repayment fit together
Asset refinance can bridge a timing gap, but it does not make a poor contract profitable. The lender will separate the use of funds from the source of repayment.
| Point in the cash cycle | Cash movement | Underwriting question | |---|---|---| | Contract award | The contractor commits labour, transport, site set-up, insurance, bonds, materials and subcontractors | Is the award signed, and which costs fall due before the first certified payment? | | Refinance completes | Net cash is released against eligible plant already owned or part-financed | Does the release cover a defined mobilisation budget after settlement and fees? | | Work starts | Payroll and suppliers are paid while the plant remains in use | Can the existing business carry finance payments if certification or payment is late? | | Applications and certificates | The contractor applies for payment; the certified amount may be lower and retention or contra-charges may reduce cash received | What is the realistic timing and amount of collectible cash, not the gross application? | | Customer pays | Contract receipts replenish working capital | Is one main contractor the only repayment source, and how has it paid this business before? | | Refinance amortises or reaches its agreed end | Monthly payments, any balloon or final option are met under the documents | Will useful asset life and contract cashflow outlast the debt? |
The safest structure does not depend on the first new-contract receipt arriving exactly on programme. If a certificate slips, a pay less notice reduces the sum or a main contractor stretches payment, the existing operation should still have headroom to meet the asset-finance instalment. Otherwise the company has converted debt-free plant into fixed debt on the strength of one forecast date.
What lenders are likely to fund, reserve or decline
Appetite differs, but the division is usually driven by title, resale evidence and serviceability rather than the colour of the machine.
| More likely to fund | Likely to reserve, reduce or condition | Likely to decline or pause | |---|---|---| | Mainstream excavators, telehandlers, rollers, dumpers, access platforms and other identifiable plant with an active UK second-hand market | Older or high-hour machines where the remaining term must be shortened | Hired or cross-hired plant, or any machine the applicant cannot legally refinance | | Equipment with legible serial numbers, purchase invoices, service history, current inspection records and comprehensive insurance | Specialist attachments or modified plant valued separately from the base machine | Missing or altered serial numbers, disputed title, inconsistent invoices or an unresolved theft/write-off marker | | Owned-out-right equipment with no prior claim | Part-financed plant where the existing settlement must be paid directly at completion | A settlement greater than the lender's supportable advance, unless the shortfall is covered from another verified source | | A mixed fleet of saleable machines whose individual and aggregate values can be checked | One specialist crane, piling rig or other single asset representing most of the collateral | Plant with no credible UK resale route, unsafe condition or an economic life shorter than the proposed facility | | A defined working-capital use such as signed-contract mobilisation, supplier deposits or a planned acquisition | A new contract with substantial retention, liquidated damages, bonding or certification uncertainty | A vague cash request that merely postpones insolvency, unpaid creditors or losses without a credible turnaround and repayment plan | | A company with accounts, current management information and bank conduct showing it can carry the proposed payments | Heavy reliance on one project or one main contractor, even where the plant itself is strong | No demonstrated capacity to service the agreement outside an optimistic new-contract forecast | | Plant located, operated and insured in the UK | Equipment moving between sites, in Northern Ireland or due to work abroad, where inspection, recovery and insurance need specific agreement | Uninsured plant or equipment moved outside the permitted territory without consent | | Assets clear of conflicting security, or where existing chargeholders agree the priority and release mechanics | A bank debenture, fixed charge or negative pledge requiring consent or an intercreditor arrangement | A prior lender refusing release or priority where the incoming lender cannot obtain enforceable security |
"Reserve" can mean a lower valuation, a reduced funding percentage, a shorter term, exclusion of one asset, a cash deposit, extra security or a condition that must be met before drawdown. It should be translated into the resulting net cash and monthly commitment. A headline approval that releases less than the mobilisation budget is not an answer to the company's problem.
Worked example: part-financed plant for a new civil-engineering contract
Illustrative example only. This is a hypothetical calculation, not a case study, quote, market advance rate or prediction of lender appetite.
Assumptions
| Assumption | Illustrative input | |---|---:| | Applicant | Established UK limited civil-engineering contractor | | Assets offered | Two excavators, one telehandler and one roller; all operating in the UK | | Title | Two assets owned outright; two under an existing hire-purchase agreement | | Lender's accepted aggregate value | £300,000 excluding VAT | | Funding percentage used only to demonstrate the calculation | 60% of the accepted value | | Existing lender's completion-date settlement | £70,000 | | Valuation, documentation and other deducted transaction costs | £5,000 | | Illustrative new agreement term | 48 months, with no balloon assumed | | Repayment basis | Existing trading cashflow must cover payments; the new contract provides additional support rather than the sole source | | New-contract timing assumption | Mobilisation now; first expected certified receipt in eight weeks | | Pricing, monthly payment and total interest | Deliberately not assumed; these require actual lender terms | | Tax and accounting effects | Excluded; the company's accountant must confirm them for the final structure |
Calculation
| Calculation | Amount | |---|---:| | £300,000 accepted value × illustrative 60% | £180,000 gross advance | | Less existing finance settlement | (£70,000) | | Less illustrative deducted costs | (£5,000) | | Net cash released | £105,000 |
The 60% input is not Bedrock guidance on what lenders will advance. It exists solely to show why a contractor must obtain the lender's valuation basis and settlement figure before treating an asset register as working capital.
Suppose the mobilisation budget is also £105,000: £40,000 for labour before the first receipt, £35,000 for materials and subcontractor deposits, £20,000 for transport, insurance and site set-up, and £10,000 contingency. The arithmetic balances, but the decision is not complete. Management still needs the actual repayment schedule, a downside cashflow showing a delayed or reduced certificate, confirmation that the assets remain useful throughout the term and clarity on what happens at the end of the agreement.
If the accepted valuation fell to £250,000 with every other illustrative input unchanged, the same 60% calculation would produce a £150,000 gross advance and £75,000 net release. The mobilisation plan would then be £30,000 short. That is the sensitivity to solve before completion, not after the lender pays the existing settlement.
Documents for a plant-refinance mobilisation file
Sending a clean asset schedule and a contract cashflow is more useful than a long company presentation. The file should allow a lender to prove ownership, value the kit and test repayment without reconstructing the position from the accounts.
Asset, title and existing security
- Asset schedule showing make, model, year, serial or registration number, hours, attachments, present location and operational status for each machine.
- Original purchase invoices and proof of payment for owned assets. If bought at auction or from a connected party, include the complete sale trail.
- Every current hire-purchase, lease or finance agreement affecting the plant, plus settlement letters valid through the expected completion date.
- Details of any bank debenture, fixed charge, negative pledge or group-company ownership. Include the relevant lender contact if consent or release will be required.
- Clear current photographs of each asset, its serial plate, hour meter, cab, tracks or tyres and material damage. Photographs support an inspection; they do not replace one.
Condition, compliance and insurance
- Service and repair history, dealer or independent-engineer reports and records of major component replacement.
- Current statutory examination or inspection records where applicable, including LOLER documentation for lifting equipment and maintenance evidence relevant to PUWER duties.
- Insurance schedule showing the insured entity, equipment, locations, uses and geographic limits. Flag any theft, total-loss or major-damage history.
- CESAR, Datatag or other registration details where present, together with any asset-finance or provenance checks already obtained.
Company and affordability
- Latest filed accounts, current management accounts, aged creditors and debt schedule, including monthly payments and security for every facility.
- Recent business bank statements covering the normal trading cycle, not just the strongest month.
- Current cashflow forecast with the proposed refinance payments inserted once actual terms are available. Include a downside case for delayed certification or payment.
- Corporation tax, VAT and PAYE position, with agreed payment plans identified rather than hidden.
- Company structure, directors, shareholders and any connected company that owns assets, employs operators or receives contract income.
The exact contract being mobilised
- Signed contract, letter of award or other evidence of a firm instruction to proceed, plus the scope, programme and start date.
- Mobilisation budget split between labour, materials, subcontractors, transport, bonds, insurance and contingency, with payment dates.
- Application and payment schedule, certification process, retention percentage and release dates, pay less provisions, liquidated damages and performance-bond requirements.
- Main-contractor or employer details, prior payment experience where the parties have traded before, and any material contra-charge or dispute history.
- Date and amount of the first cash receipt under a base case and a downside case. An application date is not a receipt date.
When Bedrock would recommend the alternative
Refinancing plant is strongest when the company needs a defined lump sum, the equipment has real equity and the debt can be repaid across its remaining useful life. It is weaker when the funding need grows with each application, when the assets must remain unencumbered for another purpose or when the release is small after settlement.
| Circumstance | Better starting point | Why | |---|---|---| | A fixed mobilisation budget and saleable plant with clear equity | Asset finance and plant refinance | Matches a fixed need to an existing long-lived asset and leaves the kit operating | | A recurring gap between applications, certification and payment across several jobs | Specialist construction invoice finance | Availability can follow eligible applications or certified debt instead of fixing a term debt against plant | | The real gap is retention and a temporary certified-payment lag, while the plant should stay free | A cashflow loan, tested against the retention timetable | Avoids encumbering core machinery to fund cash that is contractually delayed; see the separate guide to construction retention cashflow | | Strong recurring earnings but little refinanceable equity after settlement | Cashflow lending | Underwriting can rely more on affordability than on net plant value, though the cost and guarantee package may differ | | Working capital is tied up across applications or debtors, stock and a sizeable fleet | Asset-based lending | One multi-asset facility may fit the changing collateral base better than several overlapping agreements | | The new job is loss-making, unpriced for retention or dependent on one disputed certificate | No new borrowing until the contract economics are repaired | Finance can bridge timing; it cannot correct a structural loss |
Bedrock would recommend construction application finance rather than asset refinance where each completed work stage creates the next funding need and the application history is strong enough to support it. We would recommend a cashflow loan where reliable earnings support the debt and keeping strategic plant unencumbered matters more than using the cheapest-looking security. We would not recommend refinancing simply because the machines are available: the facility must fit the source and duration of the cash gap.
The risks sit beyond the headline advance
Security and title
The documents may give the lender legal title to the equipment, a fixed charge over it, rights under a hire-purchase or lease agreement, a wider debenture, or a combination. The company should know exactly which assets are caught, whether substitutions are allowed and what consent is needed before a machine is sold, replaced, moved or taken abroad. A refinance can also breach an existing bank's negative pledge if priority is not resolved first.
Personal and group guarantees
A lender may ask directors for personal guarantees or seek guarantees from connected companies, particularly where the borrower is small, the contract increases leverage or the asset owner and trading company differ. Check whether liability is capped, whether it covers one agreement or all money owed to the lender, and when it is released. Independent legal advice may be required. The presence of saleable plant does not make a guarantee harmless.
Recourse after an asset sale
Asset-backed does not mean non-recourse. If the company defaults and the lender recovers and sells the plant, sale proceeds may be reduced by transport, storage, remarketing and legal costs. Any shortfall can remain due from the company and, according to the documents, a guarantor. Test that downside using a recovery value, not a dealer's retail asking price.
Concentration
There are two concentrations to test. On the security side, one specialist machine may account for most of the value and be difficult to sell. On the repayment side, one new contract or main contractor may account for most forecast cash. A diversified fleet does not cure a single-customer cashflow risk, and a diversified order book does not create equity in one niche asset.
Valuation risk
Hours rise and condition changes between proposal and completion. Exchange rates, new-equipment supply and auction demand can move used values. An inspection may exclude attachments, identify damage or value the machine on a different sale basis from management's estimate. Obtain the final asset schedule and valuation basis in writing, then rerun the net-release calculation.
Cost and tax treatment
Compare total cash payable, not only the periodic interest or rental. Include lender interest or rentals, arrangement and documentation charges, valuation and legal costs, insurance requirements, broker commission, early-settlement calculations, any balloon or final option and VAT timing where relevant. Bedrock acts as a commercial finance broker and is paid commission on completion; its general commission ranges and fee approach are published on the regulation, fees and data page.
Sale and leaseback also has accounting and tax consequences. HMRC's Business Leasing Manual BLM35005, updated 1 April 2026, says the transaction has both a sale and a leaseback leg and that the disposal proceeds should not be overlooked. HMRC's Capital Allowances Manual CA28910, updated 8 July 2025, describes restrictions that can apply in some sale and finance leaseback circumstances. Those manuals are not a substitute for advice on the proposed documents; the company's accountant should confirm the VAT, capital-allowance and balance-sheet treatment before signing.
Exit and operating freedom
The exit may be full amortisation, a final purchase option, a balloon, a terminal rental, early settlement or another refinance. Ownership does not necessarily pass automatically at the last regular payment. Ask who owns each machine during and after the term, what the early-settlement formula is, whether there are mileage or usage-style conditions, and whether the asset can be sold to fund the balance. The facility term should finish before the equipment becomes unreliable or due for replacement.
Market context, not a promise of approval
The Finance & Leasing Association's State of the Market Report 2026, published in March 2026, reports £7.8 billion of new plant and machinery finance written by FLA members in 2025. It also reports that broker and vendor channels together accounted for more than half of annual asset-finance new business. That confirms a developed UK market for plant funding; it does not say what one contractor's used fleet will release or whether one lender will approve it.
For the wider choice between plant, applications, retention and property-backed funding, use the construction finance sector guide. The starting question remains precise: after valuation, settlement and every cost, does the net release cover the contract's realistic cash gap without making the company dependent on one certificate arriving on time?
If it might, send the company name, asset schedule, ownership or settlement position, amount required, use of funds and required date. For contract mobilisation, add the award document, mobilisation budget and expected first certified receipt. Ask Bedrock for indicative terms using those facts; an initial assessment does not require a polished finance pack.