When each option usually fits
When Asset finance usually fits
- Signal
- — The funds go on a single tangible asset with a clear resale value.
- Signal
- — You want lower effective pricing and are happy for the asset itself to act as security.
- Signal
- — Trading history is limited but the asset has strong residual value.
- Signal
- — You want to match the repayment term to the asset's useful life.
When Unsecured business loan usually fits
- Signal
- — Spend is spread across stock, marketing, payroll or refurbishment, not one asset.
- Signal
- — You want a single lump sum with no link to a specific purchase.
- Signal
- — You would rather not give the lender a charge over operational equipment.
- Signal
- — Speed matters more than unlocking the largest possible amount.
Side-by-side comparison
| Dimension | Asset finance | Unsecured business loan |
|---|---|---|
| Use of funds | Tied to one or more specific tangible assets | General-purpose business use |
| Security | The asset itself; PG common | Unsecured against assets; PG common |
| Typical amount | From a few thousand to several million, sized to the asset | Often £10,000 to £500,000, sized to affordability |
| Typical term | Two to seven years, matched to asset life | Six months to six years |
| Pricing | Stated APR or flat rate; often lower than unsecured | Stated APR; higher where unsecured |
| Trading history | Some lenders fund newer businesses against strong assets | Usually twelve to twenty-four months filed trading |
| Deposit | Often 10-20% plus VAT on hire purchase | Typically no deposit |
| Speed to drawdown | A few days to two weeks depending on asset and lender | Often within forty-eight hours on online lenders |
| Typical fit | Vehicles, machinery, IT, plant, fit-out | Working capital, expansion, refinance, mixed spend |
Shared considerations
- Both are subject to UK lender underwriting on affordability, credit and trading history.
- Personal guarantees from directors are common on either route.
- Early settlement terms differ — check the rebate or break-cost basis on each.
- Compare total amount repayable, not just the headline rate.
Frequently asked questions
- Is asset finance always cheaper than an unsecured loan?
- Usually yes for the same amount and term, because the lender has clear security in the asset. The differential narrows on small tickets or fast-depreciating assets. Always compare the total amount repayable on like-for-like terms.
- Can I refinance existing equipment to raise working capital?
- Yes, this is known as asset refinance or sale-and-leaseback. The lender values existing kit, advances funds against it, and you repay over an agreed term. Eligibility depends on the asset's age, condition, resale market and your trading profile.
- Will I own the asset?
- Under hire purchase you own the asset on final payment. Under a finance lease the lender retains title for the term. An unsecured loan never gives the lender ownership of any specific item.
- Can a startup use asset finance?
- Some asset-finance lenders consider businesses with under a year of trading where the asset has strong residual value and the directors have a clean credit profile. Unsecured loans usually require more filed history. Outcomes depend on lender criteria.