Asset finance
Asset Finance for UK Businesses
Asset finance helps a business get the equipment, machinery or vehicles it needs without paying the full cost up front. The finance is tied to a specific asset, and that asset is central to the provider’s decision.
It can also work the other way round. A business that already owns valuable equipment may be able to raise money against it.
Wize Finance can help your business see which types of finance may suit the asset you need.
Tell us what equipment or vehicles you want and roughly what they cost. The team reviews your enquiry and discusses how they could be financed.
Who owns the asset, and when
- Hire purchase
- Finance lease
- Operating lease
- Asset refinance
What is asset finance?
Asset finance is a way for a business to acquire an asset, such as equipment, machinery or vehicles, and pay for it over time instead of all at once. The finance provider funds the asset, the business uses it, and the business makes regular payments under the agreement. Because the finance is tied to the asset, the asset itself is usually central to the provider’s decision and to its security.
The term covers several different structures. In some, the business owns the asset once the payments are complete. In others, the provider keeps ownership and the business pays to use the asset for a period. Which structure fits depends mainly on whether the business wants to own the asset in the end, how long the asset will stay useful, and who should look after it in the meantime.
- whether the business wants to own the asset in the end
- how long the asset will stay useful
- who should look after it in the meantime
How asset finance works
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Choose the asset. The business identifies what it needs, usually with a supplier quote.
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Agree a structure. For example, hire purchase or a lease. This decides who owns the asset during the agreement and what happens at the end.
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Use the asset while you pay. The business uses the asset from the start and makes regular payments over the agreed term.
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Reach the end of the agreement. Depending on the structure, the business may own the asset, return it, keep using it, or arrange its sale.
What can be financed with asset finance?
Asset finance is most often used for physical assets a business relies on to operate. Equipment finance and machinery finance are both forms of asset finance: the same structures, applied to a particular kind of asset.
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Equipment and machinery
Production and manufacturing machinery, workshop equipment, and catering or kitchen equipment.
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Plant
Construction, agricultural and materials-handling plant.
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Technology
IT hardware, telephony and other business technology.
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Specialist equipment
Medical, dental, beauty, printing and other sector-specific equipment.
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Vehicles
Cars, vans, trucks and fleets.
New or used: asset finance can be used for new assets, and some providers also consider used assets. What a provider will accept depends on the asset’s type, age, condition and how easily it could be resold.
What to compare before you sign
The regular payment is only part of the picture. Before you agree to any asset finance, it’s worth comparing these across the whole agreement.
Risks worth knowing
Worth knowing
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The asset can be taken back. If payments aren’t kept up, the provider can repossess the asset. Missing payments can also affect your credit record.
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It usually costs more than paying cash. Interest and fees mean the total paid over the agreement is normally more than the asset’s purchase price.
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The provider may set conditions. Until the business owns the asset, the agreement may limit how it’s used, for example mileage on a vehicle. The business may be liable for damage beyond what the agreement allows.
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It’s a commitment for the term. Agreements commonly run for at least a year, and ending one early may involve settlement costs.
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There may be more than the asset at stake. Even though the asset is central, some providers may also ask for a personal guarantee or other security. A personal guarantee is a separate promise, made by a director personally.
Know what you need to buy?
Tell us about the asset and your business, and see which types of finance may suit it.
How Wize Finance works
Wize Finance uses the information you give us to understand what your business needs. Where appropriate, it introduces the business to a finance provider. The provider assesses the application and makes the decision.
After you submit your details, the Wize Finance team reviews your enquiry and contacts you to discuss your funding needs and next steps. Where appropriate, your details can then be shared with a suitable funding provider.
For an asset need, it helps to tell us:
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what the asset is, and whether it’s new or used
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roughly what it costs, and who the supplier is
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whether you want to own it in the end
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whether you’re buying something new or raising money against an asset you already own
Who owns the asset, and what happens at the end?
The biggest difference between the structures is ownership: who owns the asset while the business pays for it, and what happens once the agreement ends. This picture shows each structure from start to finish.
- Business owns
- Provider owns
- Depends on the agreement
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Hire purchase
- Start
- At the start, the provider funds the asset.
- During
- During the agreement, the provider owns it and the business uses it, usually looking after maintenance.
- End
- At the end, once all payments are made, ownership passes to the business.
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Finance lease
- Start
- At the start, the provider buys the asset and leases it to the business.
- During
- During the lease, the provider owns it and the business is usually responsible for insurance and maintenance.
- End
- At the end, the business may be able to keep renting it, return it, or sell it on the provider’s behalf. Ownership doesn’t pass automatically.
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Operating lease
- Start
- At the start, the provider supplies the asset for a set period.
- During
- During the lease, the provider owns it and usually looks after maintenance.
- End
- At the end, the business returns the asset or, depending on the agreement, moves to a newer one.
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Asset refinance
- Start
- At the start, the business already owns the asset, or part of it.
- During
- During the agreement, the provider has rights over the asset and the business keeps using it while making payments.
- End
- At the end, the business usually owns the asset once the money has been repaid.
The main ways asset finance is arranged
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Hire purchase The business uses the asset from day one and pays for it in instalments. The provider owns the asset until the agreed payments are complete, and ownership then passes to the business. The business is usually responsible for maintenance. The asset generally can’t be sold before the end unless the agreement allows early settlement.
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Finance lease The provider buys the asset and leases it to the business, usually for much of its working life. The business pays to use it, and is usually responsible for insuring and maintaining it. Ownership stays with the provider. At the end, the options typically include continuing to rent the asset, returning it, or selling it on the provider’s behalf.
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Operating lease The business uses the asset for a set period without taking on ownership, and the provider usually looks after maintenance. Depending on the agreement, there may be the option to move to a newer model. This can suit assets that date quickly, such as some technology.
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Asset refinance The business raises money against an asset it already owns, or partly owns. Raising money from equipment you already own is covered below.
Vehicles: cars, vans and fleets are often financed through contract hire, where the provider sources and maintains the vehicles for a fixed payment over the term. Vehicle finance has its own guide: Business Car & Van Finance.
Each structure is treated differently for tax and in a company’s accounts. Your accountant can explain how this applies to your business.Hire purchase or leasing?
There’s no single right answer. A few practical questions usually point the way.
Hire purchase, finance lease and operating lease compared
Hire purchase
- Do you want to own it in the end?
- Hire purchase Ownership passes to the business once the payments are complete
- How long will it stay useful?
- Hire purchase Suits assets the business expects to use for a long time
- Who looks after it?
- Hire purchase Usually the business
- What happens at the end?
- Hire purchase The business owns it
Finance lease
- Do you want to own it in the end?
- Finance lease Ownership doesn’t pass automatically
- How long will it stay useful?
- Finance lease Suits assets used for much of their working life
- Who looks after it?
- Finance lease Usually the business
- What happens at the end?
- Finance lease Keep renting, return it, or sell it on the provider’s behalf
Operating lease
- Do you want to own it in the end?
- Operating lease No. The asset goes back at the end
- How long will it stay useful?
- Operating lease Suits assets that date quickly or may need replacing
- Who looks after it?
- Operating lease Usually the provider
- What happens at the end?
- Operating lease Return it, or possibly move to a newer model
Neither structure is automatically cheaper.
Look at the total cost over the whole agreement, not just the regular payment. The right choice depends on your priorities, and we can help you compare overall cost, flexibility and end-of-term options.
Raising money against assets you already own
Asset refinance lets a business release cash from equipment, machinery or vehicles it already owns, while carrying on using them. It’s sometimes called sale and leaseback, because in some arrangements the provider takes ownership of the asset and the business pays to keep using it.
You don’t always need to own the asset outright. If there’s still money owing on it, for example under an existing hire purchase agreement, a new provider may settle that balance as part of the arrangement. How much might be available depends on the asset: its type, age and condition, and how much of it the business owns.
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The asset is at risk if payments aren’t kept up. If the business can’t make the payments, the provider can take the asset back, and that can disrupt the business that relies on it.
Asset finance or another kind of finance?
Asset finance works best when the money is tied to a specific asset. If the need is broader, or the thing you’re paying for isn’t a fixed asset, another type of finance may suit it better.
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Buying a specific asset the business will use: asset finance, covered on this page.
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Funding several costs at once, or a general purpose: a business loan can cover more than one cost in a single amount. See Business Loans.
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Borrowing against property or other business assets for any purpose: see Secured Business Loans.
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Buying stock to sell: stock is bought to be sold, not kept and used, so it falls under Stock Finance.
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Cash tied up in unpaid invoices: see Invoice Finance.
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A larger requirement that mixes assets with other costs: see Large Business Loans.
What providers may look at
With asset finance, a provider looks at the asset as well as the business. Criteria vary between providers and structures.
What to have ready
Providers may ask for:
- a supplier quote or invoice, and details of the asset
- company details
- recent business bank statements
- recent accounts
- details of the directors
About the asset:
- what it is and what it does for the business
- its cost and the supplier
- whether it’s new or used, and its age and condition
- how long it’s likely to stay useful
- how easily it could be resold
About the business:
- trading history and financial performance
- business bank activity
- existing borrowing
- the company’s and directors’ credit history
Asset finance FAQs
What is asset finance and how does it work?
Asset finance lets a business acquire equipment, machinery or vehicles and pay for them over time. A finance provider funds the asset, the business uses it, and the business makes regular payments under an agreement. Depending on the structure, the business may own the asset at the end, or return it.
Do I own the asset at the end?
It depends on the structure. With hire purchase, ownership passes to the business once all the payments are made. With a lease, the provider keeps ownership, and the business may be able to keep renting the asset, return it, or sell it on the provider’s behalf. The agreement sets out exactly what happens.
What’s the difference between hire purchase and leasing?
Hire purchase is designed for the business to own the asset once the payments are complete. Leasing lets the business use the asset for a period while the provider keeps ownership. Hire purchase may suit assets you’ll use for a long time; leasing may suit assets that date quickly or need regular replacement.
Is equipment finance the same as asset finance?
Equipment finance is a form of asset finance. It uses the same structures, such as hire purchase and leasing, applied to equipment and machinery. The main difference is the type of asset being financed.
What interest rate will I pay on asset finance?
There’s no single rate. The cost depends on the asset, the structure, the length of the agreement, any deposit, the business’s circumstances and the provider. Compare the total amount payable over the whole agreement, not just the regular payment.
Can I finance used equipment?
Some providers consider used equipment as well as new. Whether they will depends on the asset’s type, age, condition and how easily it could be resold.
Can I raise money against equipment I already own?
Possibly. Asset refinance lets a business release cash from equipment, machinery or vehicles it already owns, or partly owns, while it carries on using them. How much may be available depends on the asset and how much of it the business owns. The asset is at risk if payments aren’t kept up.
What is an asset-based lender?
Asset-based lending is a different arrangement from asset finance. It usually means a facility that lends against several types of business asset together, such as unpaid invoices, stock and machinery, rather than finance for one specific asset. Invoice-based funding is covered under invoice finance.
Ready to look at your options?
Tell us what your business needs to buy, or the asset you already own, and see which types of finance may suit it.