What is equipment finance?

Equipment finance is a type of asset finance used to buy or lease machinery, tools and other equipment, with payments spread over an agreed term. The equipment is usually the security.

What is asset leasing?

Asset leasing means paying to use an asset for an agreed period instead of buying it outright. Depending on the type of lease, you may return the asset at the end or have the option to buy it.

Can software or office furniture be financed?

Some providers will finance items such as IT hardware, software or office furniture, but not all do, and the terms can differ from those for vehicles and machinery. Ask the provider whether the item is covered.

What can I buy with asset finance?

Commonly vans, cars, lorries, machinery, tools, kitchen and salon equipment, IT hardware and other equipment that helps the business earn. Ask the lender whether the item you want is covered.

What's the difference between hire purchase and leasing?

With hire purchase you pay in instalments and usually own the asset at the end. With leasing you pay to use the asset and, depending on the type, may return it or have the option to buy it.

Often a deposit is asked for, though it varies by lender, the asset and your business. Some arrangements need little or none.

Asset finance explained: equipment and vehicle finance

The short answer

Asset finance lets you use vehicles, machinery or equipment now and pay for them over time, instead of finding the full price upfront.
The asset itself is usually the security, so you often don't need to offer other property.
The main types are hire purchase, where you end up owning the asset, and leasing, where you may not.
Check the total cost, who owns the asset at the end, and what happens if you want to settle early.

Asset finance, which includes equipment finance and vehicle finance, lets a business use the vehicles, machinery or equipment it needs now and pay for them over time, with the asset usually acting as the security.

A van that's off the road costs you work. A cafe without a working oven loses sales every day. A salon that needs new chairs can't wait until the next good month. Equipment problems tend to arrive when cash is tightest, and that is the gap asset finance is built for.

How asset finance works

You choose the asset, the finance provider buys it, and you make regular payments over an agreed term. Because the asset itself is normally the security, you often don't need to put up other property.

Payments are set in advance, which makes budgeting simpler, and the cost is spread across the time the asset is earning money for you.

The main types

Hire purchase

You pay in instalments and, once the final payment is made, you own the asset. It suits things you plan to keep for their whole working life, like a van or a piece of machinery.

Finance lease

You pay to use the asset for a fixed period, but the finance company owns it. At the end you may return it, extend the lease, or sometimes sell it on the lender's behalf. It can suit equipment that goes out of date quickly.

Operating lease

Similar to a lease, but usually for a shorter period, with the provider taking more of the risk on what the asset is worth at the end. It can suit things you'll want to swap regularly.

Rules about how each type is treated for tax and accounts differ, so it's worth asking your accountant which suits you.

What to check before you sign

The total you'll pay, not just the monthly figure.
Who owns the asset at the end, and whether there's a final payment.
Early settlement terms, in case you want to clear it sooner.
Insurance and maintenance. You're normally responsible for keeping the asset insured and in good order.
Mileage or usage limits, which are common on vehicle leases.
Fees. Any fee should be confirmed to you before you proceed.

Asset finance or a loan?

A loan gives you cash to spend on anything. Asset finance is tied to a specific item, but that can mean easier approval and lower or no extra security. If you're weighing the options, see secured vs unsecured business loans and our guide to getting a business loan in the UK.

What lenders ask for

Expect to provide recent bank statements, your latest accounts if you're a limited company, ID and details of the asset you want to buy. Our guide to documents for a business loan lists what's usually needed.

Getting help comparing

We're a commercial finance broker, not a lender. We introduce your business to the lenders on our panel, including asset finance providers, so you can compare without approaching each one yourself. It's free to check, and any fee is confirmed before you proceed.

You can check your options in a few minutes, with no obligation.

Common questions

What is equipment finance?: Equipment finance is a type of asset finance used to buy or lease machinery, tools and other equipment, with payments spread over an agreed term. The equipment is usually the security.
What is asset leasing?: Asset leasing means paying to use an asset for an agreed period instead of buying it outright. Depending on the type of lease, you may return the asset at the end or have the option to buy it.
Can software or office furniture be financed?: Some providers will finance items such as IT hardware, software or office furniture, but not all do, and the terms can differ from those for vehicles and machinery. Ask the provider whether the item is covered.
What can I buy with asset finance?: Commonly vans, cars, lorries, machinery, tools, kitchen and salon equipment, IT hardware and other equipment that helps the business earn. Ask the lender whether the item you want is covered.
What's the difference between hire purchase and leasing?: With hire purchase you pay in instalments and usually own the asset at the end. With leasing you pay to use the asset and, depending on the type, may return it or have the option to buy it.
Do I need a deposit?: Often a deposit is asked for, though it varies by lender, the asset and your business. Some arrangements need little or none.

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This guide is general information for UK businesses. It is not financial advice, and business funding must be repaid. Kapitl Business Finance Limited is a commercial finance broker, not a lender; all funding is subject to eligibility and credit assessment.

Asset finance explained: equipment and vehicle finance for businesses