Asset finance UK

Here we look at asset finance loans, how to compare providers and the options available to you, the merchant. Let's call it 'asset finance for dummies!'

What is asset finance?

It’s best to start at the beginning, right? Asset finance explained in layman’s terms is funding secured against equipment, which is paid back in instalments over an agreed timeframe. Alternatively, The FLA (finance and leasing agency)  use the following description; Asset finance (leasing and hire purchase) gives firms access to equipment which might otherwise be out of reach due to lack of cash flow. It usually involves paying a regular charge for use of the asset over an agreed period of time, therefore avoiding the full cost of buying outright.

What is a hard asset?

When searching for asset finance for businesses its worth bearing in mind that assets fall under two main categories, hard and soft assets – here we look at the difference between financing each type of asset;

Hard asset financing definition

Hard asset (sometimes referred to as fixed asset finance) include; cars, commercial vehicles, machinery, manufacturing equipment etc. Hard assets both new and used can be financed and tend to have a higher resale value than soft assets.

So…what is soft asset finance?

Alternatively, soft asset finance includes; Catering equipment, IT hardware and software, office furniture and even EPOS systems.  These tend to be lower in value and hold little if nothing when it comes to resale.

Why use asset financing solutions?

Asset finance can be flexible as you can use it to fund almost anything, from phones to double decker buses! It provides funding when sometimes the cost of new equipment is unaffordable. Although UK based asset finance companies vary, in terms of what they will and won’t accept, providing your company meets criteria here are just some of the benefits;


  • Asset financing allows businesses use of equipment they need, often to expand, without denting cash flow with large immediate outgoings.
  • Spread the cost of necessary equipment
  • Asset finance transactions schedules can be tailored to the business needs and wants, this includes repayment amount and the length of term.
  • Lease & asset finance are great when budgeting as they work on fixed repayments, allowing cash flow to be managed effectively.
  • Asset finance partners and providers are often experts in their particular field, meaning that businesses get the right advice first time around.

How does asset finance work?

Let’s look at the asset financing options here;

Hire purchase

Hire purchase agreements are monthly rental instalments where at the end of the term you have the option to buy the asset or return it. Payments can be structured to fit cash flow, payments can be reduced by paying the final lump sum this is known as a balloon payment.

Leasing and asset finance

Lease asset finance technically means renting an asset. The terms and rental amounts are agreed prior to obtaining the asset, then at the end of the contract the asset is returned to the lender. Some lenders allow you to benefit from the sale of the asset, if it has increased in value, however the downside is that at the end of the agreement you will not own the asset.

Operating leases

Slight different from standard asset finance loans, operating leases work effectively for high value assets. Rental is paid for the asset at an agreed rate for the time required, meaning that you can link rentals to the income your asset generates. However, the rental amount won’t cover the full cost of the asset. At the end of the term, a residual value is offered by the leasing company, meaning you can buy the asset minus the lease rentals paid so far.

Contract hire

Contract hire asset loans offer everything from sourcing, financing, and disposal of the asset (usually vehicles.) Contract hire is sold on the basis that it saves your company time and makes overall budgeting easy.


Asset finance vs bank loan

We often get asked the difference between a standard bank loan and alternative asset finance products. Businesses tend to use asset finance as it doesn’t reduce the likelihood of them being able to borrow money elsewhere, as it’s a contractual agreement rather than outstanding loan balance.

Commercial vehicle asset finance

Car asset finance is one of the most popular loans amongst businesses owners large and small. When it comes to types of asset finance, most tend to stick with leasing due to the fact that cars depreciate so much in value especially with high usage. Using an online vehicle asset finance calculator will give you a good idea of what the lease will cost per month, however we suggest comparing the overall costs, including set up costs, administration fess etc. Our finance partners can help you to compare asset finance for vehicles in UK and Europe.


How to find the best asset finance rates (UK)

By now you should have a good understanding of how asset finance works and the options available to companies. Asset finance lenders, vary greatly in who they will lend to and the rates charged. We suggest using an asset finance broker who good relationships with asset finance companies and therefore, has access to a wide selection of lenders and products. They will advise you on what products will be most suited to your needs.


What is intangible asset finance?

Intangible assets are best described as non-physical assets these include; copywrite, trademarks, patents (all being legal intangible assets) and reputation (being a competitive intangible asset.) These assets all still have value, although they cannot be seen, lending against them is assessed on value vs risk.

Can I get asset finance for start-up company?

Asset finance for start-ups is rarely offered by some by UK lenders. It can be appealing to start-ups as often, there is less risk involved than standard bank loan due to the assets still holding value if repayments can’t be made or business goes bust. To qualify for asset finance you must have at least 18 months trading history. A wide range of business apply for asset finance, from agricultural industries to retail. It’s also worth bearing in mind that the assets don’t have to be of huge value small businesses use asset finance for telephones and office furniture, to start-up or expand.

Few new business owners know that they can apply for invoice financing as an alternative to asset finance, this can be valuable in the early days to get things up and running. At Merchant Advice Service, we work with SME asset finance brokers who can advise you on your options, speak to us today.


How to find the best asset finance consultant?

We suggest using brokers who have in-depth knowledge of the industry and assess to a wide selection of asset finance providers. The asset finance industry is no different from other commercial and personal loans, each lender will have individual criteria therefore there is no point in applying to a company where you fall outside of the set criteria it wastes everyone’s time as you will be declined. For example, if you are applying for IT asset finance use a broker who has handled similar cases in the past, it’s simple. Asset finance is best compared on the total cost rather than rates alone, using asset finance calculators alone shows just the monthly repayments, an experienced asset finance company and its brokers will work through all the costs with you prior to application.

Business asset finance (UK)

Commercial asset finance if offered across many industries, our financial partners have worked with the following, to name but a few;


  • Agricultural
  • Engineering
  • Manufacturing
  • IT and tech companies
  • Transport
  • Recycling and waste management
  • Charities
  • Schools and colleges



Speak to Merchant Advice Service today for help with finding the best asset finance solution for your company now and in the future.

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