What types of assets can be financed?

Almost any tangible business asset can be financed, including commercial vehicles (vans, HGVs, trucks), manufacturing machinery, agricultural equipment, IT and technology, medical equipment, catering and hospitality equipment, and construction plant. Some specialist lenders also finance intangible assets such as software licences. The asset must have a quantifiable value and, for most lenders, a secondary market where it can be resold.

How long does asset finance take to arrange?

For standard commercial vehicles and equipment under £100,000, asset finance can be arranged in 24–72 hours. Larger deals (£500,000+) or specialist assets requiring independent valuation may take 1–2 weeks. A credit application, invoice from the supplier, and basic company information are usually all that's needed for straightforward cases.

Is asset finance suitable for start-up businesses?

Some asset finance lenders will consider businesses with 12 months of trading history, particularly for smaller amounts (under £50,000) or where the asset itself provides strong security. Start-ups with no track record face a narrower lender pool but can sometimes access finance with a director's personal guarantee or a deposit. Start-up loans from the British Business Bank are an alternative worth exploring.

What deposit is required for asset finance?

Many asset finance agreements require no deposit — the lender advances 100% of the asset's cost and recovers it through monthly payments. For higher-risk borrowers, older assets, or assets with volatile residual values, lenders may require a deposit of 10–30%. A deposit also reduces monthly payments and demonstrates commitment, which can sometimes unlock a lower rate.

What happens if I want to cancel or return the asset early?

Early termination of an asset finance agreement typically involves paying a settlement figure — usually all remaining payments, sometimes discounted for early payment. For hire purchase, paying the settlement gives you ownership of the asset immediately. For leases, settling early usually means returning the asset with no further obligation, though any shortfall on the residual value may be charged. Always check the early termination clause before signing.

What Is Asset Finance? A Complete Guide

What Is Asset Finance and How Does It Work?

Asset finance is an umbrella term for a range of financial products that allow businesses to acquire or use assets by paying in instalments over time, rather than purchasing them outright with cash.

The core principle is simple: instead of tying up £50,000 in a machine tool, you spread the cost over 3 or 5 years, keeping your cash available for stock, staffing, and growth. The asset itself — or the business’s creditworthiness — provides the security for the finance.

The UK asset finance market funds over £35 billion of business equipment annually, making it one of the most widely used forms of business finance after overdrafts.

The Main Types of Asset Finance

Hire Purchase (HP)

The most straightforward product. The finance company buys the asset; you pay monthly instalments over an agreed term (typically 1–7 years) and own the asset outright at the end after paying a nominal option-to-purchase fee (usually £1–£200).

Best for: Businesses that intend to keep the asset long-term and want to build equity. Also optimal when the asset qualifies for the Annual Investment Allowance (AIA), providing 100% tax relief in year one.

Finance Lease

The finance company owns the asset throughout the agreement. You pay monthly rentals that cover the full asset cost. At the end of the primary lease period, you can enter a secondary rental (often just one month’s payment), arrange a sale and keep most of the proceeds, or return the asset. The asset appears on your balance sheet.

Best for: Businesses wanting effective long-term control without the upfront cash outlay of HP, particularly for specialist assets the lessor can’t easily resell.

Operating Lease (Contract Hire)

The finance company buys the asset and rents it to you for a set period. Monthly payments cover only the depreciation during the lease period, not the full value. At the end, you return the asset — the lessor takes the residual value risk. Payments are fully deductible as a business expense.

Best for: Fleet vehicles, IT equipment, and any asset where regular upgrades are commercially important. Provides the lowest monthly payments of any asset finance product.

Asset Refinance (Sale and HP Back / Sale and Leaseback)

You sell an asset you already own to a finance company and immediately take it back on a hire purchase or finance lease agreement. This releases the capital tied up in the asset and converts it to a monthly payment.

Best for: Businesses that need a cash injection but don’t want to sell the asset permanently. Common in manufacturing, haulage, and construction.

Who Uses Asset Finance?

Asset finance is used across virtually every sector:

Haulage and logistics — funding HGVs, refrigerated vehicles, trailers
Construction — excavators, cranes, scaffolding, vehicles
Manufacturing — CNC machinery, production lines, robotics
Healthcare — diagnostic equipment, dental chairs, imaging systems
Agriculture — tractors, combine harvesters, livestock equipment
Hospitality and catering — commercial kitchens, refrigeration, coffee machines
Professional services — IT infrastructure, AV systems, office fit-out

Costs of Asset Finance

Interest Rate

Asset finance rates depend on the lender, asset type, loan term, and borrower credit profile. Indicative rates in 2026:

Asset Type	HP Rate Range	Operating Lease Rate Range
New commercial van	4.5–8% APR	£200–£450/month on £30,000 van
Agricultural machinery	4.0–7% APR	Less common
IT equipment	6–12% APR	£50–£200/month on £5,000 asset
Construction plant	5–9% APR	£500–£2,000/month on £100,000 plant
Medical equipment	5–9% APR	£200–£800/month depending on value

Other Costs

Documentation fee: Some lenders charge £150–£500 for setting up the agreement
Acceptance fee: Charged on some deals, typically 0.5–1% of the facility
Early settlement fee: Varies by lender and product type
Service/maintenance inclusion: Some operating leases include maintenance, tyres, and road tax — factor these savings into the cost comparison

How Asset Finance Compares to Buying Outright

Scenario: £80,000 CNC machine, 5-year useful life

Option	Upfront Cost	Monthly Cost	Tax Relief	Year 1 Cash Out
Cash purchase	£80,000	£0	AIA: £80,000 in year 1	£80,000
Hire Purchase (6% APR)	£0	£1,547	AIA: £80,000 in year 1	£18,564
Operating Lease	£0	£1,100	Rental deductible over 5 years	£13,200

HP combined with AIA delivers the same tax relief as cash purchase but preserves £80,000 of working capital, deploying only £18,564 in year one.

How to Apply for Asset Finance

Identify the asset — have a quote or pro-forma invoice from the supplier. Lenders need to know exactly what they’re funding.
Choose a product — HP, finance lease, or operating lease depending on your ownership preference and tax position.
Apply — basic company details, 3–6 months of bank statements, and details of existing finance. For larger deals, 2 years of accounts.
Get a credit decision — often within 24–48 hours for standard deals.
Sign the agreement — the finance company pays the supplier directly and the asset is delivered.
Make monthly payments — fixed throughout the term, making budgeting straightforward.

What is asset finance?

In short