Packaging machinery finance for converters, co-packers and packaging manufacturers

• Material switching. Brand owners moving from plastic to fibre, or to mono-material films that are easier to recycle, need suppliers with different machinery. A converter that cannot make the new format risks losing the account.
• Recycled content. Plastic packaging made or imported with less than the required recycled content is subject to Plastic Packaging Tax, which pushes manufacturers towards recycled resin and the equipment changes that go with it. HMRC's Plastic Packaging Tax guidance explains who must register.
• Extended producer responsibility. Under extended producer responsibility for packaging, larger businesses that supply packaged goods pay fees linked to the packaging they place on the market. That gives customers a reason to cut weight and change materials, and gives packaging suppliers a reason to re-tool.
• Labour costs. Case erectors, robotic palletisers and stretch wrappers replace manual end-of-line work and are often the first automation a co-packer buys.
• Short-run and ecommerce work. Digital cutting tables and box-on-demand machines suit online retailers who need right-sized boxes in small quantities.

Converting equipment from the main manufacturers, including die-cutters, folder-gluers, flexo printer-slotters and laminators, is traded internationally and holds value well, which makes it straightforward machinery finance territory. Thermoforming and injection moulding machines are similarly well understood. End-of-line robots and wrappers are funded widely, often with integration and guarding costs included as a soft-cost element.

The harder items are fully integrated lines designed around one product, and anything engineered into the building such as conveyors through walls or mezzanine-mounted systems. For those, expect a larger deposit or additional security. Where you already own a converting line outright, asset refinancing can fund a deposit on the next one.

Tooling: who owns it matters

Cutting forms, printing plates, moulds and change parts are expensive and product-specific. In packaging, they are often paid for by the customer and remain the customer's property, even though they sit in your factory. Lenders will not accept customer-owned tooling as security, and they will ask who pays when tooling wears out. Make tooling ownership clear in contracts before you approach a lender.

Packaging margins are sensitive to paper, board and polymer prices, and suppliers often prefer large orders. Most converters carry these materials with a revolving credit facility. Generic reels and sheet board have resale value and can support stock finance within an asset-based facility; printed and cut packaging made for one brand has almost none, because no-one else can use it. Where a confirmed order from a creditworthy customer requires materials up front, purchase order finance can pay the supplier directly.

Invoices to food, drink and consumer goods manufacturers suit invoice finance, though retrospective rebates and quality claims reduce what can be advanced. Converters supplying one dominant brand owner may need high-concentration invoice finance.

Illustration only, with round hypothetical figures and no rates. A contract packer turning over £4 million employs eight people packing cases and building pallets by hand across two shifts. A case erector, robotic palletiser and automatic stretch wrapper cost £350,000 installed, of which £60,000 is integration, guarding and commissioning.

• The machines are funded on hire purchase, with the integration costs included as a soft-cost element at the lender's discretion.
• The business shows the labour saving and reduced damage claims in a monthly forecast, so the lender can see repayments covered by savings rather than new sales alone.
• Staff move to filling lines where volume is growing, which supports the case that the investment is not dependent on one customer.

The main risk is investing in a format that customers then abandon. Before committing to a long agreement, ask the customer about their packaging plans for the next few years and whether they will commit volume. A machine bought for one brand's product can sit idle if that brand re-tenders. Other things to weigh: overlapping security between an invoice finance debenture and existing asset agreements, personal guarantees on working capital lines, and the option of leasing rather than buying where technology is changing fast. Renewable generation on a factory roof can cut energy costs and is funded separately through renewable energy finance.