Buying a new van, a coffee machine or a CNC router outright can tie up cash you’d rather keep for running the business. Asset finance lets you spread the cost over the asset’s working life, with the asset itself acting as security.
Hire purchase (HP)
With hire purchase, you pay an initial deposit and then fixed monthly instalments. Once the final payment (and usually a small option-to-purchase fee) is made, you own the asset.
Good for: equipment you plan to keep for its whole working life, such as vehicles, plant and machinery.
Worth knowing:
- you can usually claim capital allowances, as you’re treated as the owner for tax purposes (check with your accountant)
- VAT on the asset is usually paid up front with the deposit
Leasing
With a lease, the finance company owns the asset and you pay to use it. At the end of the term you can usually extend the lease, return the asset or upgrade.
There are two main types:
- Finance lease. You pay for most of the asset’s value over the term and are responsible for maintenance. At the end you may be able to keep using it for a small rent or share in the sale proceeds.
- Operating lease. You pay to use the asset for part of its life, and the lessor takes the risk on its value at the end. This is common for vehicles and IT.
Good for: assets that go out of date quickly, or that you’ll want to replace regularly.
Worth knowing: VAT is usually added to each rental rather than paid up front, which can help cash flow.
Refinancing assets you already own
If you own valuable equipment outright, some lenders will release cash against it. This is often called asset refinance or “sale and hire purchase back”. It can be a quick way to raise working capital without new property security.
What lenders look at
- the type, age and resale value of the asset
- whether it’s new or used, and who is supplying it
- your trading history and accounts
- the deposit you can put down
Quick comparison
| Hire purchase | Leasing | |
|---|---|---|
| Own it at the end? | Yes, after the final payment | Usually no |
| VAT | Mostly up front | On each rental |
| Best for | Long-life assets | Assets you’ll upgrade |
Asset finance can also be arranged under the Growth Guarantee Scheme with accredited lenders. Tell us what you need to buy, and we’ll match you with lenders who specialise in that kind of asset.