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Forms of asset finance
Asset finance is an umbrella term covering hire purchase (HP), finance lease, operating lease, and refinancing of assets your company already owns. In HP, the lender purchases the asset and your company pays instalments until ownership transfers at the end of the term. Under a finance lease, the lender retains ownership throughout and your company pays for use of the asset.
The defining characteristic is that the asset itself is the primary security. This often allows asset finance to be arranged without a personal guarantee, and without drawing on other facilities — though lenders will still assess the company's ability to meet payments. Figures quoted are illustrative and not an offer.
When a term loan is more appropriate
A term loan is better suited when you want outright ownership from day one, when the asset is bespoke or difficult to value, when you are bundling asset costs with installation, training or working capital, or when you prefer not to have the asset pledged to a finance company. Term loan funds land in your bank account and can be allocated as needed.
The trade-off is that without the asset as security, the lender relies more heavily on the company's financial profile. Depending on company size and trading history, a personal guarantee or fixed charge over business property may be required. See secured vs unsecured borrowing.
Tax and accounting considerations
HP and outright purchase (via loan) allow the company to claim capital allowances — including the Annual Investment Allowance up to the current limit — whereas an operating lease is treated as a rental expense for tax purposes. Finance leases have their own accounting treatment under IFRS 16 or FRS 102, placing the asset and a corresponding liability on the balance sheet.
- HP / purchase → company claims capital allowances
- Operating lease → rental expense, no capital allowance
- Finance lease → IFRS 16 / FRS 102 on-balance-sheet treatment
The optimal structure depends on your company's tax position, cashflow, and whether ownership matters. Your accountant should model the after-tax cost of each route before you commit.
Frequently asked questions
Can asset finance be arranged for second-hand equipment?
Yes, though the lender will require a valuation and the advance rate may be lower than for new assets. Some funders specialise in specific asset classes — commercial vehicles, agricultural machinery, print equipment — where they have strong resale market knowledge.
What happens if we want to upgrade the asset before the end of the term?
Under HP you can settle the outstanding balance early (a settlement figure is available on request from the funder) and arrange new finance on the replacement asset. Under a finance lease, early termination clauses vary — check them before signing. Operating leases typically offer more flexibility to upgrade.
Funding for UK limited companies
Credicorp lends to your company, not to you personally — short-term working capital with no personal guarantee. See what your business could access.