What is asset and equipment finance?

Asset and equipment finance is a family of lending products that allow businesses to obtain physical or intangible assets through structured payments rather than paying the full purchase price up front. Instead of a single capital outlay, you spread the cost — usually via monthly instalments — which helps protect working capital and maintain liquidity.

Common types of asset and equipment finance include hire purchase and lease finance, as well as specialised options such as asset refinancing and operating leases. These products are available to sole traders, partnerships and limited companies across the UK and can be used for almost any business asset.

Why businesses use asset finance

There are several reasons businesses choose asset finance rather than buying outright:

• Preserve cash: Keep capital available for day-to-day operations or growth activities.
• Match cost to use: Spread payments over the useful life of the asset so the income generated helps service the cost.
• Tax and accounting benefits: Depending on the structure and current tax rules, payments may be treated differently for accounting and tax purposes.
• Access to better equipment: Acquire newer, more efficient machinery or technology that might be unaffordable with a one-off purchase.
• Upgrade flexibility: Leasing in particular makes it easier to replace assets at the end of a term to stay current with new technology.

Hire purchase — straightforward ownership over time

A hire purchase (HP) agreement allows a business to hire an asset and then purchase it by paying fixed instalments over an agreed term. At the end of the contract — once the final payment or optional balloon payment is made — ownership transfers to you. Key features include:

• Ownership at the end: You become the legal owner after all payments are made (or after paying a previously agreed final payment).
• Fixed repayments: Regular, predictable monthly payments that make budgeting simple.
• Asset on your balance sheet: The asset usually appears on your balance sheet (and you may be able to claim capital allowances).
• Security: The lender typically retains a legal interest (a form of security) in the asset until it is paid off.

Hire purchase is popular for vehicles, production machinery and other tangible assets where eventual ownership is desirable. It blends the advantage of spreading cost with the certainty of ownership at the end of the term.

Lease finance — use without ownership

Leasing gives you the right to use an asset while the lender (or lessor) retains ownership for the agreed lease period. There are several leasing structures — operating leases and finance leases are the most common — and each has different accounting and tax implications.

• Operating lease: Essentially a rental arrangement where the asset is returned to the lessor at the end of the term. Often off-balance-sheet treatment is possible (subject to accounting rules) and it’s ideal for short-term use or when technology might become obsolete quickly.
• Finance lease: Similar to hire purchase in that you take on most of the risks and rewards of ownership during the lease term. At the end of a finance lease you may have options including purchasing the asset at a pre-agreed residual value.
• Flexibility: Leasing allows upgrades at the end of the lease term, which is valuable for assets with short useful lives (e.g. IT equipment).

Leasing is commonly used for vehicles (fleet leasing), IT infrastructure, medical equipment and specialist machinery where businesses prefer continual refresh cycles or want to avoid the responsibilities of ownership.

Understanding hard vs soft assets

Different lenders specialise in financing either tangible (hard) or intangible (soft) assets. Knowing the distinction helps you select the right product and lender.

Hard assets

Hard assets are tangible, physical items that hold resale value and can often be used as security. Examples include:

• Plant and machinery
• Commercial vehicles and fleets
• Construction equipment
• Manufacturing lines and industrial kit
• Office furniture and some fixtures

Because hard assets can be repossessed and resold if necessary, lenders are generally more willing to offer competitive rates and longer terms for these items.

Soft assets

Soft assets are intangible and may be harder to value or repossess. They nonetheless form a major part of modern business investment. Examples include:

• Software licences and subscriptions
• Cloud-based platforms and SaaS contracts
• IP-related costs, where permitted
• Telecommunications infrastructure
• Design and implementation services bundled with software

Financing soft assets may require specialist lenders who understand licensing models and can assess future revenue streams. While these lenders may charge higher margins or apply different covenants, asset finance makes it possible to spread software costs and avoid capitalising large upfront payments.

Which is right for your business: hire purchase or lease?

Choosing between HP and leasing depends on several factors. Use this simple checklist to guide your decision:

• Do you need ownership at the end? — Choose hire purchase if yes; choose lease if you prefer not to own the asset.
• Is technology likely to become obsolete quickly? — Leasing (especially operating leases) may be better for fast-changing equipment like servers or specialist IT.
• How important are balance sheet considerations? — Leases may offer different accounting treatment; seek advice from your accountant about the impact on assets, liabilities and covenants.
• Do you want to minimise maintenance responsibilities? — Some leases include maintenance and service as part of the package.
• What is the tax position? — Tax treatment varies with product and can change with legislation; always check with a tax adviser for the current position.

Typical terms, rates and fees

Asset finance products vary across providers, but the following gives an overview of what to expect:

• Term lengths: From 12 months for short-term equipment leases to 5–7 years (or longer) for vehicles and heavy machinery, depending on the asset’s useful life.
• Deposit or initial rental: Some deals require an initial payment (deposit or initial rental) which can reduce monthly costs.
• Interest or rental rates: Rates depend on the asset type, lender appetite, your credit profile and whether the asset is hard or soft. Hard asset deals typically enjoy lower margins due to security value.
• Residual values: For leases, a residual value may be assumed at the end of the term — this affects monthly payments and end-of-term options.
• Fees: Arrangement fees, documentation fees and valuation fees may apply. Check the small print for administration charges at the end of the term.

What lenders look for

Asset finance providers assess a range of factors that determine pricing and approval:

1. Asset type and resale value: Lenders prefer assets with clear second-hand markets (e.g. trucks, construction kit).
2. Business credit profile: The company’s credit history and director credit checks are important.
3. Trading history and turnover: Lenders want confidence that your cash flow can support repayments.
4. Deposit and equity contribution: A reasonable deposit lowers lender risk and may secure better rates.
5. Industry and operational risk: High-risk sectors sometimes face tighter terms or specialist underwriting.

Documents and information you’ll need

Having the right paperwork ready speeds up approval. Typical requirements include:

• Detailed quote or invoice for the asset
• Company registration (CRN) and VAT registration (if applicable)
• Recent management accounts and/or year-end accounts
• Business bank statements for the last 3–6 months
• Cash flow forecast for larger or longer deals
• ID and proof of address for directors
• Details of any existing finance or encumbrances on the asset

Use cases and examples

Here are common real-world scenarios where asset and equipment finance works well:

Example 1 — Fleet replacement for a delivery company

A courier firm needs to replace part of its van fleet costing £120,000. Using a lease (fleet finance), it spreads cost over four years, keeps cash free for hiring drivers, and benefits from included maintenance packages that reduce operating headaches.

Example 2 — Manufacturing line upgrade

A small manufacturer invests £80,000 in a new packaging line via hire purchase. The company becomes owner at the end of five years and claims capital allowances against the asset while matching repayments to the lift in production capacity.

Example 3 — Software and SaaS financing

A fast-growing software business finances a £40,000 package of enterprise software and implementation. A specialist lender provides a structured funding plan that treats the licence and implementation costs as a single agreement, spreading payments and avoiding a large upfront expense.

Pros and cons — clearly weighed

How to choose the right provider

Not all lenders are the same. Follow these steps to find the best fit:

1. Match lender expertise to asset type: Use lenders experienced in your sector and asset class (e.g. vehicle fleet specialists for vans).
2. Compare total cost: Look beyond monthly payments at arrangement fees, maintenance costs and end-of-term liabilities.
3. Check flexibility: Can you upgrade, return or purchase the asset at the end of term on reasonable terms?
4. Ask about bundled services: Maintenance, insurance and replacement options can be included and may save you time and money.
5. Use a broker: A broker like Gable can source competitive deals from multiple lenders, saving time and unlocking specialist funds.

Accounting & tax considerations (UK)

Accounting and tax treatment depends on whether an agreement is a lease, finance lease or hire purchase and on current UK tax law:

• Capital allowances: In many cases, buying or hire purchasing qualifying plant and machinery can allow claims for capital allowances.
• Lease rentals: Operating lease rentals are often treated as an expense in the profit and loss account (subject to rules).
• Consult your accountant: Tax rules change and the correct structure depends on your specific circumstances — always seek professional advice for the most current guidance.

Case study — precision engineering workshop

Business: Precision engineering SME in the Midlands

Need: £65,000 for new CNC machines to increase capacity and precision

Solution: A blended package combining a hire purchase for the most valuable machine (so the business would own it) and a 36-month operating lease for a secondary unit expected to be upgraded within three years.

Outcome: The company avoided a large capital outlay, took advantage of capital allowances on the HP machine, and retained flexibility on the secondary unit. Production output increased by 30% within the first year and the business maintained healthy cash reserves to support additional hires.

How Gable supports your asset finance decision

Gable specialises in matching UK businesses with the right asset finance solutions across a broad panel of lenders. Our service helps you:

• Choose between hire purchase, finance lease and operating lease based on your objectives
• Identify lenders with sector and asset expertise
• Present a strong application and prepare necessary documentation
• Negotiate competitive terms, including maintenance and end-of-term options

We also explain accounting and tax implications in plain English and put you in touch with trusted accountants or tax advisers when needed.

Frequently Asked Questions (FAQ)

Q: What types of assets can be financed?

A: Almost any business asset can be financed. Typical hard assets include vehicles, plant, machinery and specialised equipment. Soft assets include software licences, cloud subscriptions and certain IT systems. Lenders vary in appetite, so specialist lenders may be needed for niche or high-value assets.

Q: Do I own the asset during the finance term?

A: With hire purchase you typically own the asset at the end of the term. With a finance lease you take on many ownership risks during the term but legal title often remains with the lessor until a purchase option is exercised. With an operating lease you use the asset but ownership stays with the lessor throughout.

Q: Is asset finance expensive?

A: Cost varies by asset type, lender, term and your business credit profile. Hard assets normally attract lower margins because they can be repossessed and sold if necessary. Soft asset finance can attract higher margins due to valuation and recovery complexity. Always compare total cost including fees and any maintenance packages.

Q: Can start-ups access asset finance?

A: Yes — many lenders will work with early-stage companies, particularly if the asset itself has resale value or if the founders provide a sensible deposit. Start-ups may face stricter underwriting and may be offered shorter terms or higher rates unless supported by strong projections or security.

Q: What happens at the end of a lease?

A: End-of-term options depend on the agreement. For operating leases you typically return the asset or renew the lease. For finance leases or hire purchase you may have the option to purchase the asset at a residual value, refinance it, or return it depending on the terms agreed.

Q: Can I include maintenance and insurance in the deal?

A: Yes — many finance providers offer bundled packages that include maintenance, servicing and insurance. Bundling can simplify administration and sometimes reduce overall cost, but check the details carefully before committing.

Q: How quickly can I get funded?

A: Simple asset finance deals can often be agreed and funded in a few days, particularly with online lenders or brokers. More complex arrangements, high-value assets or deals requiring legal documentation may take several weeks. Gable can help speed the process by preparing paperwork and matching you to lenders who can meet your timeframe.