What Is Asset Finance UK?
Mark Grant
Head of Asset and Property Finance · Mar 31, 2024 · 7 min read
Asset finance is a category of business lending that allows UK businesses to acquire equipment, vehicles, or machinery by spreading the cost over time rather than paying upfront. It is one of the most widely used forms of business finance in the UK, with over £35 billion of assets funded annually. Here is how it works.
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The three main types of asset finance
Hire purchase (HP): you make a deposit and monthly instalments, and own the asset outright at the end of the term. Best for assets you want to own long-term and where capital allowances are valuable. Finance lease: the lender owns the asset throughout; you make rental payments and have options at the end (extend, purchase, return). Best where you want to spread the cost but are uncertain about long-term ownership. Operating lease: shorter-term rental with lower payments, as the lender takes residual value risk. Best for assets that become obsolete quickly.
Asset refinance (sale and leaseback): sell an asset you already own to a lender and lease it back, releasing the equity as cash. The business retains full use of the asset. This is a useful way to unlock working capital without new debt and is available on most types of productive business asset.
Why asset finance often beats a term loan for equipment
When a business takes a term loan to buy equipment, the loan is unsecured (based on trading performance and credit), which typically means higher rates and smaller amounts. When the same business uses asset finance, the loan is secured against the asset, which the lender can repossess if necessary. This security allows lenders to offer better rates, higher amounts, and wider eligibility, including for businesses with shorter trading histories.
The tax treatment adds further advantage for hire purchase. The full asset value qualifies for the Annual Investment Allowance (up to £1 million per year), creating an immediate corporation tax deduction in the year of purchase. Finance lease rentals are fully deductible as a business expense. The right structure depends on your tax position and whether ownership matters.
"Asset finance is the one product in business lending where a new business competes on similar terms to an established one, because the lender's primary security is the asset, not the business's history."
- Mark Grant, Head of Asset and Property Finance
Frequently Asked Questions
What assets can be financed in the UK?
Almost any productive business asset: commercial vehicles, cars, plant and machinery, manufacturing equipment, agricultural machinery, medical devices, IT equipment, and more. The lender's appetite varies by asset type and age. Newer, well-established assets attract the best rates.
The bottom line
Spark Finance works with 30+ specialist asset finance lenders covering vehicles, plant and machinery, technology, agricultural equipment, and more. 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.
