Asset finance
Funding secured on the equipment itself, repaid over the asset's working life, with ownership either transferring to you at the end or remaining with the lender.
The rate matters, but the structure matters more. Which of the three you choose changes who owns the equipment, how it is taxed, whether it sits on your balance sheet, and what you are left holding in year five — so it is well worth a conversation before you sign.
The parameters
Where this product sits.
Ranges across the market, so you can sanity-check any quote — ours or anyone else’s — before you take it seriously.
- Hire purchase
- You own it
- Ownership transfers on the final payment. Capital allowances are yours from day one; VAT is usually payable up front.
- Finance lease
- Lender owns it
- You rent it for substantially all its life. Rentals are generally allowable against tax; VAT spreads across the rentals.
- Contract hire
- You return it
- Fixed term, agreed mileage or usage, maintenance often bundled. No residual value risk and no asset at the end.
- Deposit
- 0–20%
- Hard assets with strong resale value can go to zero. Soft assets rarely do.
- Term
- 2–7 years
- Matched to working life. Soft assets such as IT and furniture are usually capped at three years.
These are indicative market ranges rather than a quotation — they are here so you can sanity-check any offer you are shown. Your own terms will be priced on the asset, the borrowing entity, your trading history and the exit, and we will put real figures in front of you on the first call.
Typical cases
What it is used for.
Plant and machinery
Excavators, CNC machines, presses, production lines. Strong resale value, so the best rates and the lowest deposits in the whole asset market sit here.
Commercial vehicles
Vans, HGVs, tippers, trailers and specialist bodies. Often the fastest facility in this list — same-day decisions are routine on a clean covenant.
Soft assets
IT, telephony, furniture, catering equipment, gym kit. Little second-hand value, so terms are shorter, rates higher and personal guarantees more likely.
Refinance and sale-and-leaseback
Raising cash against equipment you already own outright. One of the few ways to release working capital from a balance sheet without touching property.
In detail
How it works in practice.
Choosing between the three structures
Hire purchase suits an asset you intend to keep and work into the ground. You claim capital allowances on the full cost from the outset, only the interest element is a profit-and-loss cost, and the asset is yours at the end. The catch is VAT: on hire purchase it is normally payable in full at the start, which is a substantial day-one cash requirement on a £200,000 machine.
A finance lease suits an asset you will use for most of its life but do not need to own. The rentals are generally allowable against taxable profit and the VAT spreads across them rather than landing up front. At the end you can usually continue at a peppercorn rental, or sell the asset as the lender's agent and keep the bulk of the proceeds.
Contract hire suits assets you want to hand back — most obviously vehicles. The residual value risk sits with the lender, maintenance can be bundled, and the monthly cost is lower than the equivalent purchase. You simply have nothing at the end, which is the point.
Balloons, and the trap in them
A balloon payment is a large sum deferred to the end of the agreement. It reduces the monthly cost, sometimes dramatically, and it is the reason two quotes on the same asset can differ by 40% a month.
It is not free money. If the asset is worth less than the balloon when the agreement ends — which happens routinely on vehicles that have covered more miles than planned — you cannot sell it to clear the balance, and you refinance the balloon at a worse rate on an older asset.
The test is simple: what will this asset realistically be worth on the day the balloon falls due? If the honest answer is less than the balloon, the structure is wrong regardless of what it does to the monthly figure.
Why the asset itself changes the terms
Lenders classify equipment as hard or soft, and it drives everything. A hard asset — an excavator, a lathe, an HGV — has an established second-hand market, an identifiable serial number and a predictable depreciation curve. The lender can recover and sell it, so it lends against it cheaply.
A soft asset cannot really be recovered. Second-hand office furniture and three-year-old laptops are worth close to nothing, and a fitted item may not be removable at all. So soft asset lending is priced much more like unsecured lending, with shorter terms and personal guarantees.
This is why a mixed order needs splitting. Putting a £180,000 machine and £20,000 of IT on one agreement drags the whole facility toward soft-asset pricing. Two agreements will normally cost less than one.
Before you sign
Four things worth checking.
VAT timing on hire purchase
Payable in full at the start on most HP agreements. On a large asset that is a serious cash call, even though you reclaim it in the next return.
Documentation and option-to-purchase fees
Small individually, routine across the market, and rarely in the headline quote. Ask for the total payable over the term.
Excess usage charges
On contract hire, mileage or hours over the contracted figure are charged at a rate set at the start. Estimate honestly rather than optimistically.
Personal guarantees on soft assets
Near universal, because the lender has no realistic recovery from the equipment. Worth knowing before you sign for a phone system.
Yes — refinance, sometimes called sale and leaseback. The lender buys the asset from you at an agreed value, pays you the cash, and you repay over a term while continuing to use it.
It is one of very few routes to working capital that does not touch property or your unsecured capacity. The asset needs to be owned outright, identifiable by serial number, and still have useful life.
More readily than most facilities, because the lender holds the asset. Historic CCJs, a previous insolvency or a thin credit file narrow the panel and raise the rate rather than closing the door.
What matters most is the asset. A recoverable hard asset with a clear resale market will find a lender in circumstances where nothing unsecured would.
You pay a nominal option-to-purchase fee, typically between £50 and £250, and title transfers to you. The asset is then yours outright.
If a balloon was built into the agreement, that falls due at the same point and must be paid, refinanced or covered by selling the asset.
Yes, and it is common. Lenders look at the age at the end of the agreement rather than the start — many will not have an asset older than ten or twelve years when the term finishes, which caps the term you can have on an older item.
Private-sale purchases are harder than dealer purchases, because the lender must verify title and condition. Not impossible, but expect an inspection.
Less than unsecured borrowing does. It is secured on a specific asset rather than against the general covenant, so it uses up less of the capacity a bank will look at.
It is still visible and still counted in affordability. A business carrying six asset agreements will have that total serviced cost taken off before any other lender assesses what is left.
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