Asset finance
Borrowing secured against a specific vehicle, machine, or piece of equipment. The cheapest UK SME credit available because the lender has real collateral to repossess.
Definition
Asset finance is a category of UK SME lending where the facility is secured against a specific physical asset. The asset is the collateral — if the SME defaults, the lender can repossess and sell. Because the lender's recovery is well-defined, asset finance APRs are typically 4–8 percentage points below unsecured working-capital lending.
Three structures
1. Hire purchase (HP)
SME pays monthly instalments plus a small "option to purchase" fee at the end (typically £150–£250). Ownership transfers to the SME at end of term. Asset sits on the SME's balance sheet from day 1; depreciation is deductible. The most common structure for vehicles and capital equipment that the SME intends to keep.
2. Finance lease
SME pays rentals over the asset's economic life. Ownership stays with the lessor; the SME has full economic control. Under UK FRS 102, finance leases are on-balance-sheet for small companies and above. Rentals split into interest + capital for accounting. Used for assets where the SME wants flexibility on end-of-life (upgrade, return, secondary lease).
3. Operating lease
SME rents the asset for less than its useful economic life, then returns it. Lessor retains ownership and end-of-life risk. Off-balance-sheet for micro-entities. Used for IT hardware, photocopiers, soft assets that depreciate fast and where the SME doesn't want residual exposure.
Hybrid: Refinance — the SME already owns the asset and uses it as collateral for a fresh loan. Used to unlock working capital from existing kit. Common for vehicle fleets and manufacturing plants.
Typical UK APRs by asset class (2026)
| Asset class | Typical APR | Term | Why this rate |
|---|---|---|---|
| Cars / light vehicles | 5–9% | 3–5 yr | Deep used market; established residual values |
| HGVs / commercial vehicles | 6–10% | 4–6 yr | Strong resale market; B2B asset |
| Plant + heavy machinery | 7–12% | 5–7 yr | Limited liquidity for niche kit |
| Manufacturing equipment | 7–12% | 5–7 yr | Sector-specific residual; often custom |
| Technology hardware | 8–14% | 2–3 yr | Rapid depreciation |
| Soft assets (furniture, IT, fit-out) | 10–15% | 2–4 yr | Low secondary value |
Established SMEs (3+ years trading) get 100–300 bps better than newly-incorporated. Asset-finance lenders look at the company's credit AND the asset's secondary market — both matter.
UK provider landscape
High street banks
Lloyds Bank Commercial Finance, NatWest Lombard, HSBC, Barclays Asset Finance. Lowest rates for established SMEs with existing banking relationship. Slower decisioning (1–2 weeks).
Specialist lenders
Close Brothers Asset Finance, Investec Asset Finance, Hampshire Trust Bank, Aldermore (commercial arm), Paragon Bank. Sector-specialists with deeper risk appetite for unusual assets. Decision in 24–72 hours.
Captive vendor finance
Most major equipment manufacturers operate their own finance arms — DAF Financial Services (HGVs), Caterpillar Financial (plant), JCB Finance, Konica Minolta Premier Finance, John Deere Financial. Often the cheapest route for standard equipment because the manufacturer subsidises the rate to drive sales.
Broker marketplaces
Funding Options, Capitalise, BLN, Asset Finance Solutions. Access multiple lenders via a single application. Useful for SMEs without an established banking relationship or for unusual asset profiles.
When asset finance fits a UK SME
The classic triggers:
- New incorporation with a specific equipment need (HGV, fit-out kit, machine)
- Existing SME wanting to expand capacity without depleting cash
- Existing SME with paid-up equipment using it to refinance for working capital
- Sector transition (manufacturer moving from manual to automated production)
Where Borrowsignal fits
Asset finance lenders use Borrowsignal as a top-of-funnel data source for new UK SMEs in asset-heavy sectors. The Borrowsignal score weights recent registered-office change to a commercial address and SIC codes 41–43 (construction), 49 (transport), 25–33 (manufacturing) heavily — these are the asset-finance-fit signals. A daily feed reaches asset-finance SDRs before the SME has even ordered the equipment.
Related
- Working capital loan — unsecured alternative
- Invoice finance
- Factor rate
- EBITDA — primary leverage metric for asset finance
- UK working-capital pricing benchmarks
Frequently asked
What is asset finance?
UK SME lending secured against a specific physical asset (vehicle, equipment, machinery). Three main structures: hire purchase, finance lease, operating lease. APRs typically 4–8 points below unsecured because the lender has real collateral.
What's the difference between hire purchase and a finance lease?
HP: SME owns asset at end of term, on balance sheet day 1. Lease: ownership stays with lessor, SME has economic control, on-balance-sheet for small+ entities under FRS 102.
What APR is typical for UK asset finance in 2026?
Cars 5-9%, HGVs 6-10%, plant 7-12%, tech hardware 8-14%, soft assets 10-15%. Established SMEs 100-300 bps better than fresh incorporations.
Who are the main UK asset finance providers?
Banks (Lloyds, NatWest Lombard, HSBC); specialists (Close Brothers, Investec, Hampshire Trust, Paragon); captive vendors (DAF, Caterpillar, JCB, Konica Minolta); broker marketplaces (Funding Options, Capitalise).