Asset finance for UK vehicles and equipment

When a UK SME needs to buy a van, a piece of plant, a forklift or a CNC machine, asset finance is almost always the right shape. The lender's risk is anchored to the asset's resale value, so underwriting weights the asset over the borrower's financials. This is why asset finance is one of the few products genuinely accessible to short-history businesses, businesses with adverse director credit, and businesses without strong management accounts. It is also a cheaper way to fund a capital purchase than draining working capital or stretching an unsecured loan.

How the three main structures work

Hire purchase

Hire purchase is the most familiar structure. You pay a deposit, the lender pays the supplier for the asset, and you pay monthly instalments over an agreed term — typically 12 to 60 months. The asset appears on your balance sheet and you claim capital allowances. At the end of the term, after a small "option to purchase" fee, full ownership transfers to you. Hire purchase is the standard route for vehicles and most equipment.

Finance lease

In a finance lease, the lender owns the asset and you pay rentals for the use of it across a fixed term. At the end of the primary period, you can usually enter a secondary period at a nominal rental, sell the asset on the lender's behalf for a rebate, or return it. The asset sits on your balance sheet under accounting rules (IFRS 16 and FRS 102 Section 20). The rentals are deductible as a business expense, which is often more tax-efficient than capital allowances on long-lived assets.

Operating lease

An operating lease is more like a long-term rental. The lender takes on the residual value risk, the rentals are usually lower than under a finance lease, and at the end of the term you return the asset. This is the typical structure for fleet vehicles, IT equipment and assets that depreciate fast or are subject to technology refresh.

What you can finance

• Vans, lorries, refrigerated and specialist commercial vehicles.
• Cars (subject to BIK and CO2 considerations).
• Construction plant: excavators, telehandlers, dumpers.
• Agricultural equipment, manufacturing machinery, CNC and printing equipment.
• Specialist kit: dental and medical, hospitality (cooking equipment, refrigeration), broadcast and AV.
• IT hardware, AV equipment and selected high-value furniture refits.

What is harder to finance

Soft assets — fixtures, fittings, signage, anything that has weak resale value — are harder. Many asset finance lenders will not lend against soft assets, or will only do so as part of a deal anchored to a hard asset. Software, deposits, intangibles and consumables are not asset finance candidates. Used assets are fundable but pricing and LTV depend on age and condition; very old assets (10+ years) or specialist items with no resale market can be declined.

UK lenders to look at

• Lombard — the asset finance arm of NatWest, broad UK SME coverage.
• Novuna Business Finance — strong on hard assets and trades.
• Propel Finance — fast-track decisions on smaller-ticket hard assets.
• Grenke — specialist in IT, AV and office equipment leasing.
• Simply Asset Finance — open to short-history businesses and harder credit.
• Time Finance — adverse-credit-friendly asset finance.

Pricing in the UK market

Asset finance is typically priced as a flat monthly cost over the term. For prime-credit hire purchase on a new commercial vehicle, expect annualised rates of 7 to 11 per cent. For adverse credit or short-history applications, 12 to 18 per cent is more typical. Soft assets and specialist plant are priced higher than mainstream vans and lorries. Deposits typically range from 10 to 20 per cent on new assets, higher on used.

Eligibility signals lenders look at

1. Asset type and condition: is it a mainstream asset with a clear resale market?
2. Asset age: new assets carry lower margins; used assets at the limit of acceptable age cost more.
3. Use case: a £40k van for a courier with a signed delivery contract beats a £40k van "to grow the business".
4. Trading history: 6 to 12 months is generally fine; new-business desks accept day-one.
5. Director credit: less weighted than in unsecured lending but recent CCJs are still considered.
6. Affordability: rentals must be covered comfortably by EBITDA or cashflow.

Refinancing existing assets

Sale-and-leaseback or sale-and-HP-back is a useful working-capital tool. The lender buys an asset you already own outright and immediately leases or HPs it back to you. Cash is released into the business, repaid over the term of the new agreement. This works well for businesses with paid-off vehicles or plant that need a working capital injection without an unsecured loan. Most mainstream asset finance lenders offer the structure, subject to a fresh valuation.

Typical timeline

A clean asset finance deal completes in 2 to 5 working days. The lender will ask for the supplier invoice or pro-forma, six months of bank statements, ID and proof of address. On used assets, an HPI check (for vehicles) or engineer's report (for plant) may be required. On larger tickets above £100k, expect a more detailed underwriting process and 5 to 10 working days.

When asset finance is not the right product

If the underlying need is general working capital, asset finance is the wrong tool — even if you happen to own an asset to use as collateral. A working capital line, MCA, invoice finance facility or unsecured loan is better-shaped. Asset finance earns its place when the use of funds is genuinely an asset purchase, where the asset has a resale market, and where the term of the finance roughly matches the useful life of the asset.