Asset finance and leasing give UK businesses access to essential equipment without the need for large upfront costs. In this guide, we explore how it works, key options like hire purchase and leasing and when to consider alternative financing options.
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If you’re in need of equipment for your business but don’t want to tie up your day-to-day capital in a big upfront purchase, asset finance and leasing could be the perfect solution.
Asset finance and leasing helps you to acquire equipment, vehicles, and machinery without making a full payment straight away. Instead, you can spread the cost over time, keeping cash flow on track while still benefiting from using the asset when you need it.
There are several ways to structure leasing and asset finance, with three primary options:
Each approach offers different advantages, and the best choice depends on your financial situation and business needs.
In this article, we’ll look in more detail at how it works, what options might be available to you and how it could help your business.
Choosing between hire purchase and leasing ultimately depends on what you want from your asset finance agreement.
If you need equipment that will depreciate in value quickly, leasing may be the more cost-effective option, as you can upgrade at the end of the lease. But if you intend to use the asset for many years, hire purchase could make for a better investment in the long term.
One of the biggest advantages of finance and asset leasing is taking pressure off your cash flow. Instead of tying up a large amount of capital in an expensive purchase, you can spread into instalment payments, in line with your revenue.
Leasing frees up working capital, allowing you to invest in growth, marketing, or operational improvements. Compared to traditional business loans, asset leasing and finance are often easier to secure, especially for businesses with limited credit history. Since the asset itself acts as security, lenders may be more flexible with their approval criteria.
Lenders typically assess several factors before approving asset based finance and leasing agreements.
Many lenders require you to have been trading for at least one or two years. While there is no strict minimum turnover requirement, a stable revenue stream improves eligibility.
A strong credit history increases approval chances, but even businesses with lower scores may qualify through asset based finance and leasing limited agreements, where the asset itself secures the loan.
Different industries, from construction to retail, use asset finance and leasing to fund essential equipment, and lenders often tailor solutions based on specific sector needs.
Asset depreciation plays a key role in leasing and asset finance. Depreciation affects the resale value of equipment, which influences monthly payments and lease-end decisions.
If an asset loses value quickly, leasing can be more attractive since you are not responsible for its resale. On the other hand, if an asset retains value, hire purchase might be preferable, as ownership at the end of the agreement could be financially beneficial.
By using asset based finance and leasing limited businesses can invest in new equipment without financial strain. Whether you need to upgrade your technology to improve efficiency or require extra machinery to expand your capacity, this financial solution will let you invest in growth without large capital outlays.
Close Brothers Asset Finance and Leasing is a great example of how sustainable funding models support businesses. They offer tailored financial solutions that help companies grow without overburdening cash flow.
Yes, but terms vary. Lenders consider factors like the asset's condition, residual value, and overall lifespan. Some lenders specialise in second-hand asset finance, offering tailored solutions for buying used equipment.
Used equipment is usually more affordable, reducing the sum that needs to be financed. However, some lenders have restrictions on the age or condition of second-hand assets.
They’ll usually want to check the equipment and interest rates and terms may vary. Some lenders charge slightly higher rates for used equipment due to potential depreciation risks.
Modern asset finance and leasing software have radically simplified financing agreements for businesses. For example, digital tools help businesses manage contracts, automate finance applications, and track repayments.
The process of lending is also made faster with technology. Lenders use cloud-based platforms and AI-driven risk assessment tools to streamline applications and improve customer experience.
As a result, asset finance and leasing are simpler to do than ever.
The main advantages of asset finance and leasing agreements over large business loans are that they are easier to secure and tend to have cheaper interest rates, as the assets are used as security.
Many lease agreements also include maintenance and servicing, reducing the risk of unexpected repair costs that could disrupt financial planning.
In industries where advances happen rapidly (like IT, healthcare, and manufacturing), owning equipment outright could mean falling prey to rapid obsolescence and frequent costly upgrades. Leasing eliminates this concern, as you can simply upgrade or switch to newer models at the end of the lease term.
At the end of an asset leasing agreement, the outcome depends on the type of lease and the terms you’ve agreed with your lender. Typically, one of three things can happen: You return the asset to the lender, you extend the lease, or you can pay a final amount to take ownership.
Buying the asset outright can be a cost-effective solution if the equipment is still valuable and continues to meet your company’s requirements. This is often done at a predetermined price or based on the asset’s residual value.
Alternatively, you can also extend the lease, letting you continue to use the equipment without the immediate financial burden of buying it. This is particularly handy if the asset remains in good condition and replacing it isn’t a priority.
Upgrading to a newer version of the asset is another route. Many leasing agreements are structured with this flexibility in mind, enabling you to stay competitive without the hassle of selling outdated equipment.
Finally, you can just give the asset back. This is a good choice if you simply no longer need the asset or you’d like to explore different financing solutions (like an iwoca Flexi-Loan).
Asset finance and leasing is a flexible, practical solution if you’re looking to acquire essential equipment without a big upfront payout.
Whether that’s done through leasing, hire purchase or asset-backed financing, these options help you manage cash flow, enable sustainable growth, and think more strategically about how you invest.
If you are considering your financing options, asset finance and leasing is a good place to start (especially if you struggle with accessing traditional debt finance). However, it’s not the only route open to you.
As with anything, asset finance and leasing come with drawbacks. For one, they’re tied to a particular asset. This means you don’t have the strategic flexibility to reprioritise or funnel your spending towards something else.
An iwoca Flexi-Loan, in comparison, is not limited to a particular piece of equipment. You’ll have a credit limit – much like a credit card – that you can use on what you think is best for your business.
So if you’re in the market for asset finance, take a beat and ensure that it’s the right move for you and your business.
Apply for a Flexi-Loan with our simple online form. With fast approval, minimal paperwork and no hidden fees. Apply for a Flexi-Loan today.
