Materials handling equipment finance

How do warehouses finance forklifts and materials handling equipment?

Warehouses, logistics firms and manufacturers typically finance forklift fleets on lease or contract hire, which often comes with a maintenance package and benefits from regular refresh, while racking and fixed handling equipment is more often financed on hire purchase since it is kept for the life of the site. Demand is usually triggered by a new warehouse lease or a contract win with a fixed start date, so the equipment needs to be funded and delivered before that start date rather than once the contract is already generating revenue.

Buyers are warehouses, logistics and distribution firms, manufacturers moving goods internally, and equipment hire companies, most often expanding capacity to meet a new warehouse lease or a contract win with a fixed start date. Because the start date is usually fixed by the client or the lease, the equipment has to be in place on time regardless of the business's own cash position at that point, which is a strong reason to finance rather than delay while cash slowly accumulates.

Lease or contract hire suits forklift fleets particularly well, since these arrangements often bundle in a maintenance package and let a business refresh its fleet regularly without carrying the resale risk itself. Hire purchase is a better fit for racking and fixed handling equipment, which is generally installed once and kept for the life of the site rather than refreshed on a cycle the way a forklift fleet typically is.

Forklifts have one of the deepest used markets in the whole of asset finance, which is a large part of why forklift finance rates are generally competitive even for a smaller or newer business. Bespoke conveyor systems and automation built into a specific building are far harder to resell once removed, so lenders assess this kind of equipment more on the strength of the business and its site commitments than on the equipment's own resale value.

The mistake we see most often is financing a forklift fleet over a term longer than the warehouse lease it supports, which can leave a business with equipment finance still running after the site itself has been given up. Matching the equipment finance term to the length of the underlying warehouse lease, where practical, avoids that mismatch. It is worth checking break clauses in the lease too, since an early exit from the site can leave the same mismatch even on a term that looked well matched at the outset.

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