Financing a Robot

Borrowing to buy the robot outright

A loan lets you own the robot from day one, so you carry its resale value and its repair risk. Banks and equipment lenders will want the quote, the specification and evidence that the robot will pay its way. In the United States, the Small Business Administration's 504 programme offers long-term, fixed-rate financing for major fixed assets through Certified Development Companies, with loans of up to $5.5 million and maturity terms of 10, 20 or 25 years. Its rules require machinery and equipment to have a remaining useful life of at least 10 years, so check how a lender will judge useful life for the robot you have in mind before you apply. Compare the total interest with the alternatives below.

Hire purchase and the tax position

Hire purchase spreads the price over instalments, and ownership passes to you once the final payment and any option fee are made. In the UK, the tax treatment is one of its main attractions. GOV.UK guidance on capital allowances says you cannot claim plant and machinery allowances on things you lease, because you must own them, unless you have a hire purchase contract or a long funding lease. Ask the finance company for the full repayment schedule, the interest rate, any option-to-purchase fee and the early settlement terms, then check with your accountant how the allowances would work for your business. Confirm who must insure the robot while payments are running, and what happens if it is written off.

Leases and the balance sheet

A lease gives you use of the robot for a fixed term without owning it, and at the end you may return it, extend the term or buy it. Under IFRS 16 Leases, lessees that report under IFRS recognise a right-of-use asset and a lease liability for leases longer than 12 months, unless the asset is of low value. For those businesses, a lease no longer keeps a robot off the balance sheet. Ask the lessor about the end-of-term options and how any buy-out price is set, who maintains and insures the robot, what return condition is expected and who judges it, and whether you can upgrade to a newer model part way through the term.

Robots-as-a-service against owning

Under a robots-as-a-service agreement, you pay a recurring fee while the robot normally stays the provider's property, along with responsibility for its upkeep and software. The fee can look high next to a loan repayment, because it carries costs that an owner pays separately. To compare fairly, add up every payment over the period you expect to use the robot for each option, then add the maintenance, insurance, software and staff time that the service fee would cover. Subtract the expected resale value for the options where you end up owning the robot. Check minimum terms and exit fees, since a low monthly price tied to a long commitment can cost more than a loan if your needs change.

Sources and further reading

• 504 loans — US Small Business Administration.
  SBA terms for long-term, fixed-rate loans on major fixed assets, including machinery and equipment.
• Claim capital allowances: what you can claim on — GOV.UK.
  UK guidance on which business assets qualify for allowances, and how leased and hire purchase items are treated.
• IFRS 16 Leases — IFRS Foundation.
  Summary of how lessees bring most leases onto the balance sheet as right-of-use assets and lease liabilities.

Common questions

Can I finance a used robot?

Often, yes, though lenders may offer shorter terms on older equipment and ask for an independent valuation or inspection report. Some finance companies only fund used robots bought from approved dealers, so ask before you agree a price with a private seller.

What do lenders ask for when financing a robot?

Expect to provide the supplier's quote, the robot's specification, recent accounts or bank statements and a short case showing how the robot will be used. Lenders also want to know the supplier, the delivery date and whether installation is included, since they may pay the supplier directly.