Can I Get a Business Loan to Buy Equipment UK?
Mark Grant
Head of Asset and Property Finance · Jul 21, 2024 · 6 min read
You can use a business loan to buy equipment, but in most cases asset finance is a better structure. Asset finance is specifically designed for equipment purchases: the loan is secured against the asset, which typically means better rates, higher amounts, and wider eligibility than an unsecured term loan for the same purpose.
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Asset finance vs term loan for equipment: the comparison
A term loan for equipment purchase: unsecured (or secured against other assets), typically higher rate (6% to 25% APR), based primarily on trading history and credit score. Amounts limited by your borrowing capacity. Best when you need flexibility to use funds for multiple purposes, not just the equipment.
Asset finance for equipment: secured against the equipment itself, lower rate (6% to 16% APR equivalent), primarily assessed on the asset and your ability to service the payments. Better eligibility for newer businesses. The asset must be a productive business asset that the lender can value and, if necessary, recover. Best when you have a specific equipment purchase in mind.
Tax benefits of asset finance for equipment
Hire purchase for equipment qualifies for the Annual Investment Allowance (AIA), allowing you to deduct the full purchase price from taxable profits in the year of purchase, up to the £1 million annual AIA limit. This can generate a significant corporation tax saving in year one, reducing the effective after-tax cost of the equipment.
Finance lease rentals are fully deductible as a business expense. An operating lease may be off-balance-sheet depending on the structure and accounting standard your business uses. Consult your accountant on the most tax-efficient structure for your specific circumstances before deciding between hire purchase, finance lease, and an outright purchase loan.
"Almost every equipment purchase is better served by asset finance than by a general business loan. The security, the tax treatment, and the eligibility criteria all stack in asset finance's favour."
- Mark Grant, Head of Asset and Property Finance
Frequently Asked Questions
Can I get asset finance for second-hand equipment?
Yes. Most asset finance lenders consider second-hand equipment, though rates are slightly higher than for new assets and the maximum age varies by asset type. Vehicles up to 10 years old are commonly financed. Older specialist equipment may require a valuation.
The bottom line
Spark Finance arranges asset finance for every type of business equipment across 30+ specialist lenders. Start at apply.sparkfinance.co.uk.
Check your eligibilityAbout the author
Mark Grant
Head of Asset and Property Finance
Mark heads asset and property finance at Spark Finance, arranging hire purchase, asset refinance, bridging, and commercial mortgages for UK businesses and property investors. He works across construction, manufacturing, and property sectors to structure funding secured against assets and property.
