Asset Finance Explained

What is asset finance?

Business asset finance is a way of funding a physical business asset — a van, a machine, a forklift, a dental chair — over the period it is earning, rather than buying it outright. It covers equipment finance, machinery finance and commercial vehicle funding under one heading. Because the lender has security in something tangible with a resale value, the assessment is different from unsecured lending, and often more achievable.

How does asset finance work?

You choose the asset. The lender pays the supplier directly. You then repay over an agreed term, typically two to five years, sometimes longer for assets with a long working life. What happens at the end depends which structure you chose. We are a credit broker, not a lender, so our job is finding which of 60+ lenders fits your situation.

Hire purchase

Hire purchase spreads the full cost of the asset. You pay a deposit and fixed instalments, and once the final payment clears you own it. The asset sits on your balance sheet from the start, VAT is normally reclaimable up front on qualifying business assets, and capital allowances may be available. It suits businesses keeping equipment long term.

Finance lease

A finance lease means the lender buys the asset and rents it to you over a term. You fund the depreciation rather than the full value, so monthly payments are lower, and VAT is typically spread across the rentals instead of paid up front. At the end you can usually extend, or sell the asset as the lender’s agent and keep most of the proceeds.

Contract hire and operating lease

Contract hire hands the disposal risk back to the lender. You pay a fixed monthly amount and hand the asset back at the end, with no exposure to what it is worth then. It suits businesses replacing assets on a fixed cycle where predictable cost matters more than ownership.

Asset refinance and sale and leaseback

These work backwards: you already own the asset, and the lender advances cash against it. Equipment leasing and refinance together mean a business can both acquire new assets and release capital from existing ones.

Hire purchase vs lease — which suits which situation

• Keeping the asset for years? Hire purchase usually makes most sense.
• Replacing on a cycle? Finance lease or contract hire.
• Monthly cost the constraint? Finance lease funds depreciation, so payments are lower.
• VAT the constraint? A lease spreads it across the rentals.
• Need cash, not kit? Refinance what you already own.

Asset finance rates and what drives them

There is no single rate. What you are offered depends on the asset and how well it holds value, the term, any deposit, and your trading position. Asset finance rates on a well-secured machine over a sensible term will beat unsecured borrowing of the same size; the same business on an unusual asset with no deposit will see something different. Anyone quoting a rate before seeing the asset is guessing.

Asset finance companies and lenders

The asset finance UK market is far bigger than the high street. Alongside the banks sit specialist asset finance lenders, manufacturer-backed funders and independents, many of whom only accept business introduced by a broker. That is the practical reason to use one: a large part of the market is not directly reachable, and different lenders have appetite for entirely different assets.

What an asset finance broker actually does

A lender defends one credit policy. A broker looks across the market. In practice that means one conversation instead of several applications, no repeated credit footprints from shopping around yourself, and access to lenders who never deal direct with the public. Where a bank sees a decline, a broker often sees a different lender’s appetite.