If you need to replace old equipment or invest in some new software – and you don’t have immediate access to sufficient free capital – then Asset Finance can be a great alternative route.

Under an Asset Finance agreement, you take out a loan to buy or lease the asset you need without having to delay. The relevant asset can be anything beneficial to your business, from a new computer to a fleet of delivery vans.

Many Asset Finance arrangements are hire purchase contracts, which give you immediate access to an asset that you will ultimately own outright. The payments can be spread over several years, making it very efficient in terms of managing capital outlay.

Alternatively, you can also sign a leasing agreement, which gives you use of the asset without you ever actually getting to own it. Instead, at the end of the agreed term, you simply hand back the asset, or possibly enter into a new agreement for a more modern equivalent.

Asset financing agreements are therefore a flexible alternative to a bank loan. They allow you to invest in the thing you need today, to compete effectively, and keep control over your ongoing cash flow: and because they are a form of secured lending, either a lease agreement or hire purchase can be cheaper to arrange than a standard bank loan.

Hire Purchase

These agreements generally require that you pay an up-front deposit, followed by fixed monthly instalments for a term generally up to five years. After you make your final payment, the ownership of the asset will transfer to you.


A lease agreement may be cheaper, as you won’t ever own the asset. It involves getting permission to use the asset for a period of time in return for a monthly fee – usually the fee, including any interest, is agreed at the outset and fixed for the entire term, so you have complete clarity before you sign.

Often manufacturers offer leasing agreements, and these can also include regular servicing options. You get to use the required asset throughout the agreed period, without needing to tie up any capital.

Leasing also means that if you can’t pay at a future date, you only lose the use of that particular asset. In the interim, so long as you keep up-to-date with the agreed payments, the lender can’t cancel the agreement and withdraw the asset from you.


If you currently own an asset, then you might be able to borrow against some or all of its capital value. (So, if it’s a vehicle, you can borrow up to its resale value today, not its cost when it was bought new.) 

Or you can sell the asset to a lender, who then agrees to lease it back to you immediately. That way you get some immediate capital for use against other priorities, without losing the use of the existing asset entirely. This will impact your Balance Sheet, as the asset is no longer yours.

When to consider asset finance arrangements

To access more efficient, modern equipment at a lower capital cost to the business.

Are there disadvantages?

Leasing or HP can be more expensive overall, compared to buying the asset outright for a one-off cash lump sum. You will also find it hard to cancel a long-term agreement, if your circumstances or requirements change in future.

The Lending Channel can introduce you to lenders offering competitive rates for asset financing of all kinds. Call a member of our team today on 01738 583008 for a free no-obligation discussion of your requirements.

The Lending Channel are members of the National Association of Commercial Finance Brokers (NACFB).
2/1 King James VI Business Centre, Friarton Road, Perth, PH2 8DY
Tel: 01738 583008 | Fax: 01738 500402

The Lending Channel are authorised and regulated by the Financial Conduct Authority.
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