Asset finance, in full
This is the detail behind the asset finance overview: the five structures explained properly, how the rates and fees actually work, the tax side, and how it stacks up against other funding. If you already know what you need, skip it and tell us about the asset.
By the CapExpand Team, led by Alex Beardsley · Updated June 2026
The five types, in detail
Hire purchase (HP)
You put down a deposit, pay fixed monthly instalments, and the asset is yours once the final payment clears. It is commonly used for plant, machinery and vehicles a business intends to run for years. You build equity as you go and can usually claim capital allowances. If owning the asset at the end matters to you, hire purchase is the structure that gets you there.
Finance lease
The funder buys the asset and leases it to you over an agreed term. You take on most of the risks and rewards of owning it, but they keep legal title. Rentals are usually a business cost. Good for higher-value kit where you would rather not sink the cash, or where you want the VAT spread across the rentals instead of paid upfront.
Operating lease
You pay to use the asset for a set period and hand it back at the end, with no obligation to buy. The rentals are based on use, not the full value, so they can be lower. It tends to suit businesses that replace kit on a cycle and would rather not deal with selling the old one.
Contract hire
The vehicle version of an operating lease, often with maintenance and servicing bundled in. Popular for fleets. You get a fixed monthly cost and someone else carries the resale risk. It is not a route to ownership, so it does not suit a business that wants to own the vehicle at the end.
Asset refinance and sale and leaseback
Own valuable kit outright? A lender can advance cash against it and you repay over a term. Sale and leaseback goes further: you sell the asset to the funder for a lump sum and lease it straight back, so you keep using it day to day. Both are ways to pull working capital out of things you have already paid for. We use these a fair bit when a business is asset-rich but cash-tight.
A few less common structures we also arrange when they fit: lease purchase and business contract purchase, which are hire purchase variants built around a larger balloon; chattel mortgage, common in agriculture; and stocking or floorplan finance, used by dealers to fund stock they will sell on. If a lender on our panel offers it, we can place it.
What you can finance
Lenders sort assets into three buckets, and it drives the rate and the deposit. Hard assets hold their value and are easy to resell, so they get the keenest terms. Medium assets sit in the middle. Soft assets lose value fast or are hard to recover, so they are fundable but on tighter terms and shorter periods.
Hard assets
Keenest termsVehicles, HGVs, plant, excavators, tractors, CNC machinery, production lines.
Medium assets
In betweenPortacabins and modular buildings, commercial catering, gym equipment, AV kit.
Soft assets
Shorter termsIT and servers, EPOS, furniture, fit-out, software and security systems.
Beyond the obvious, we regularly place finance on:
New or used, from small-ticket items into seven figures. Greener kit like solar, biomass, heat pumps and electric vehicles is increasingly easy to fund, and some lenders price it keenly. If it has a clear value and a useful life, a lender will take a look.
Sectors we cover
Different trades have different rhythms, and the lenders who understand them give the best terms. We place asset finance across:
Rates, fees and the total cost
Asset finance is usually quoted as a flat rate, which is the rate applied to the original amount across the whole term. The thing nobody tells you is that a flat rate looks far cheaper than it really is, because you keep paying it on the full balance even as you pay the debt down. As a rough guide the equivalent APR is close to double the flat rate. Always ask for the APR and the total payable so you are comparing like with like.
What moves your price: the asset and how easy it is to resell, the term, the size of your deposit, how long you have traded, the strength of your accounts, and director credit. A clean limited company buying a mainstream van gets a very different number to a new-start buying niche kit. We see typical business asset finance land somewhere from mid-single-digit to low-double-digit annual rates, but that range is wide and yours could sit either side of it.
Watch the extras: documentation or facility fees, an option-to-purchase fee on hire purchase, and the early settlement terms. None of these are dealbreakers, but they belong in the total when you compare offers. We will always show you the full cost, not just a tempting monthly.
The repayments can also flex to your cash flow. Lenders offer seasonal payment profiles for farming and tourism, deferred or low-start payments while an asset beds in and starts earning, VAT deferrals so you are not funding the VAT on day one, and balloon payments to keep the monthly down. Tell us how your money comes in and we will ask lenders to build the profile around it.
Tax treatment (then check with your accountant)
We are not tax advisers, so treat this as background and confirm the detail with your accountant. Here is the general shape so you know what to ask about.
- HPYou generally own the asset for tax purposes, so you can usually claim capital allowances on it and treat the interest part of the payments as a business expense.
- LeaseThe rentals are usually deductible as a business cost. The funder owns the asset, so you generally do not claim capital allowances on it.
- AllowancesCapital allowances can include the Annual Investment Allowance (up to £1 million on qualifying plant and machinery) and, for companies, full expensing on qualifying new equipment. Cars have their own CO2-based rules and are treated differently.
- VATOn hire purchase, VAT is usually charged on the asset upfront and a VAT-registered business can typically reclaim it. On leasing, VAT is usually charged on each rental. Cars with private use carry VAT recovery restrictions.
Tax rules change and depend on your circumstances. None of this is tax advice. Check the position with a qualified accountant before you rely on it.
How it compares to other funding
| Asset finance | Unsecured loan | Cash advance | |
|---|---|---|---|
| Secured on | The asset | Often a guarantee | Future card sales |
| Typical cost | Lower | Medium to high | Highest |
| Repayments | Fixed monthly | Fixed monthly | Slice of daily takings |
| Best when | Buying an asset | General working capital | Short-term, card-heavy trade |
Look, cash advances earn their keep for a card-heavy business that needs money fast, and we place them every week. But paying a high cash advance factor to buy a van that sits on the books for years rarely adds up on the numbers. Where the money is for a specific asset, asset finance is usually the lower-cost route. We'll set the costs side by side so you can judge for yourself.
Pros and cons, straight
Where it wins
- Keeps cash in the business instead of a big upfront hit
- Lower rates than unsecured borrowing, the asset is the security
- Fixed, predictable monthly payments
- Often doable for newer or bumpier-credit businesses
- Possible tax efficiencies (check with your accountant)
The catch
- The asset can be repossessed if you fall behind
- A director personal guarantee is often needed
- On a lease you do not own the asset at the end
- Flat rates hide the true cost, so check the APR
- Balloons lower the monthly but raise the total
More questions
What is a balloon payment?▼
It is a larger optional final payment at the end of a hire purchase, set against the assets expected value. It keeps the monthly payments lower, then you settle the balloon to own the asset, refinance it, or in some structures hand it back. Common on vehicles. The catch is you are paying interest on a bigger balance for longer, so it costs more overall.
Can I get asset finance with bad credit or as a new business?▼
Sometimes. Because the asset is the security, it can be more achievable than an unsecured loan even with a few bumps. Expect a larger deposit, a personal guarantee and a higher rate. Brand new companies are harder but not impossible, especially where the directors have a real track record in the same trade.
What is asset refinance or capital release?▼
If you already own an asset outright, a lender can advance you a lump sum against its value and you repay over a term. It frees up cash from kit you have already paid for. The amount depends on the assets current value and condition.
Do the rentals on a lease count as a business expense?▼
Usually, yes. Lease rentals are generally deductible as a business cost, though there can be restrictions on cars. The funder owns the asset, so you generally do not claim capital allowances on a leased asset. Confirm the detail with your accountant.
What happens at the end of a finance lease?▼
It depends on the agreement. You might extend for a peppercorn rental, sell the asset to a third party as the funders agent and keep a share of the proceeds, or hand it back. The funder keeps legal ownership throughout, so you do not automatically own it.
Is VAT charged differently on hire purchase versus leasing?▼
Generally yes. On hire purchase the VAT on the asset is usually due upfront and a VAT-registered business can typically reclaim it. On a lease the VAT is usually charged on each rental. Cars with private use carry VAT recovery restrictions. Speak to your accountant for your situation.
How much can I borrow?▼
It is driven by the asset value and your business strength rather than a fixed cap. Small ticket deals start in the low thousands and run well into six and seven figures for plant, machinery and fleets. Tell us the asset and we will tell you what is realistic.
Sources
- Finance & Leasing Association (FLA) asset finance statistics
- British Business Bank, Small Business Finance Markets
- FCA Consumer Credit sourcebook (CONC)
- GOV.UK, Annual Investment Allowance
- GOV.UK, full expensing for companies
- GOV.UK, business cars and capital allowances
- HMRC, VAT guide (Notice 700)
- NACFB, National Association of Commercial Finance Brokers
Important information
CapExpand Ltd is not authorised by the Financial Conduct Authority and can only complete non-regulated introductions. We work with UK limited companies and LLPs only, for business purposes. We are not a lender and we do not provide financial, tax or legal advice. We receive commission from lenders if a deal completes, at no cost to you. All finance is subject to status and the lender's own checks.
Ready when you are
Tell us the asset and a bit about your business, and we'll come back with the lenders best placed to fund it.