Specialist Asset Finance for Plant, Tools and Machinery

Asset Finance Explained

Asset finance is a way of acquiring business equipment by spreading the cost over its working life. Instead of paying for a digger, a welding rig or a vehicle out of your bank balance in one go, you put down a deposit and make fixed monthly payments over a term that matches how long the asset will earn. We are a broker rather than a lender, so we place your requirement with the asset finance funders most likely to say yes to your business.

Asset finance uses the asset itself as the security for the agreement. That changes what a funder underwrites: alongside your accounts, they are looking at what the machine is worth and how easily it could be sold on. It is why asset finance is often available to a trade business that would struggle to get an unsecured business loan of the same size.

How does asset finance work from quote to final payment?

Asset finance follows the same order every time. You choose the equipment and get a written quote from the supplier. We take that quote, with details of your business and its trading history, to the asset finance funders whose appetite matches the asset and the amount. Once the agreement is signed, the funder pays the supplier directly and your payments begin.

The term is set against the working life of the asset. Vehicles usually run over three to five years, workshop equipment two to five, and heavy plant up to seven. Payments are normally fixed, so the cost is predictable while the machine is out earning. Deposits vary: some funders write business at nil deposit for established companies buying recognisable assets, others want ten or twenty per cent on used or specialist kit. A larger deposit lowers the monthly payment and usually improves the rate.

How does hire purchase work when you want to own the equipment?

Hire purchase is an asset finance agreement under which you hire the equipment from the funder and take ownership once the final payment is made. It is the most common choice among the tradesmen we work with, because most intend to keep the machine rather than hand it back.

You pay a deposit, then fixed monthly payments over the term, then a small option to purchase fee that transfers title. Because hire purchase is treated as a purchase for tax, the asset sits on your balance sheet from day one, you claim capital allowances on the full cost, and the interest within each payment is a deductible business expense. Hire purchase can also carry a balloon payment, a larger final sum parked at the end of the term. A balloon cuts the monthly cost, but you need a plan for clearing it: refinancing the balance, selling the asset, or paying it from profit.

What is the difference between a finance lease, an operating lease and contract hire?

A finance lease is a rental agreement that passes most of the risks and rewards of the asset to you without passing legal ownership. You rent it for a primary period, then usually continue on a much smaller secondary rental, sell it to a third party as the funder's agent and keep most of the proceeds, or return it.

An operating lease works to a different intent. The funder takes a view on what the equipment will be worth at the end and charges only for the value you use, so rentals are lower but the asset always goes back. Contract hire is the version of an operating lease most tradesmen have already met, normally on vehicles: a fixed monthly rental over an agreed term and mileage, often with maintenance included, and the vehicle handed back at the end.

The rule of thumb is simple. If you want to own it, use hire purchase or a finance lease. If you want the lowest monthly cost on something you were going to replace anyway, contract hire or an operating lease is cheaper to run.

Can you raise cash against plant and machinery you already own?

Asset refinance releases cash tied up in assets your business already owns. The funder buys the asset from you at an agreed value, pays the money into the business, and you carry on using the asset under a new agreement. Also called sale and leaseback, it is one of the quickest ways for an established trade business to raise working capital without losing the use of anything.

It works best on plant and vehicles with a clear market value and a documented history: an excavator, a tipper, a CNC machine. The funder wants the original invoice, proof you own the item outright or a settlement figure on existing finance, and evidence of condition. Where finance is still running, a refinance can settle the old agreement and release the difference. We see it used to fund a deposit on a larger contract, to cover payroll while retentions are outstanding, or to replace cash spent on an outright purchase.

What finance is available for diggers, excavators and site plant?

Plant and machinery finance is asset finance written on the heavy equipment that construction and groundworks businesses use to deliver work. Diggers, excavators, telehandlers, dumpers, rollers, scaffolding, generators and attachments are all funded this way, as are the vehicles that move them.

Funders like these assets because they hold their value and there is an active second hand market for almost all of them. A five year old three tonne excavator from a mainstream manufacturer still has a resale price a funder can rely on, which often means better terms than an unsecured business loan. Used machinery financing is widely available, though age matters: many funders consider equipment up to around ten years old, and set the term so the agreement finishes before the machine reaches the end of its useful life. Auction lots and private sales can be financed with an inspection or valuation and confirmation of clear title.

Which hard and soft assets will funders actually finance?

A hard asset is equipment with a strong resale value that can be identified, moved and sold on. A soft asset has little or no second hand value once it has been installed or used. The distinction drives which funders will look at the deal and on what terms.

Diggers, vehicles, machine tools, trailers and compressors are hard assets, and the widest choice of funders competes for them. Fit outs, racking, CCTV and security systems, IT hardware, software licences, air conditioning and mezzanine flooring sit at the soft end. Soft assets can still be financed, but that funding leans on the strength of your business rather than resale value, so expect a shorter term, a larger deposit or a personal guarantee. Packaging the soft element alongside a hard asset in one agreement often gets a whole project funded where the soft part alone would have been declined.

How do VAT and tax relief work on asset finance?

VAT is handled differently depending on whether the agreement counts as buying or renting, and this is one of the few places where the choice has a real cash impact. On hire purchase the VAT is usually payable up front on the price of the asset, because it is treated as a supply of goods at the outset. On a finance lease or contract hire, VAT is charged on each rental, so it spreads across the term.

For tax relief, hire purchase lets you claim capital allowances on the full cost as though you had bought the asset outright. The Annual Investment Allowance lets qualifying businesses write off up to £1 million of plant and machinery spending against taxable profit in the year of purchase, and full expensing may also apply to companies buying qualifying new equipment. Under a lease you do not own the asset, so rentals are generally deductible as a trading expense instead. Neither route is automatically better, so put both to your accountant before signing.

Who regulates asset finance, and where does the Growth Guarantee Scheme fit?

Asset finance in the UK comes from banks, independent funders and manufacturer finance arms, and the market has its own trade body in the Finance & Leasing Association. FLA members sign up to a business code covering how agreements are sold and how customers are treated, which is a sensible first check on a funder whose name you do not recognise.

Protection depends on who is borrowing. Asset finance provided to a limited company for business purposes is generally unregulated, which is part of why decisions come back quickly and the paperwork is shorter. Sole traders and smaller partnerships can fall inside consumer credit rules depending on the size and purpose of the agreement, and any firm carrying on regulated credit or hire business must be authorised by the Financial Conduct Authority.

The Growth Guarantee Scheme, delivered by the British Business Bank through accredited lenders, sits alongside the commercial market and can support asset finance as well as business loans, overdrafts and invoice finance. It gives the lender a government backed guarantee on part of the facility, which can make the difference for a viable business that is short of security. The borrower stays fully liable for the debt either way.