Products7 min read
Understanding asset finance for growing businesses
Asset finance can help spread the cost of equipment and vehicles. Here is what business owners should know before exploring options.
Tera
Asset finance lets a UK business use essential equipment, machinery or technology while spreading the cost over an agreed period. The asset typically secures the facility, which may preserve working capital — though deposits, ownership structure and eligibility vary by provider and product type.
How asset finance works
Rather than paying upfront for equipment, you make regular payments over a fixed term. The finance is usually secured against the asset being financed. Ownership may transfer at the end of the agreement in some structures; in others, you return or refinance the asset.
Common structures
- Hire purchase — you hire the asset with an option to own at the end of the term
- Finance lease — the lender owns the asset during the term; you may have renewal or purchase options
- Operating lease — shorter-term use without ownership; common for equipment with shorter useful life
What can be financed
- Manufacturing and production machinery
- Construction plant and tools
- Kitchen and catering equipment
- Medical and healthcare equipment
- Technology and office systems
- Commercial vehicles (or via dedicated vehicle finance)
When businesses may consider asset finance
- Replacing ageing equipment without a large upfront outlay
- Expanding capacity — a second production line, additional vehicles, new site fit-out
- Preserving cash reserves for payroll, stock and day-to-day trading
- Matching repayments to the revenue the asset generates
Businesses in construction, transport, manufacturing and healthcare commonly use asset finance for equipment-heavy operations.
What providers typically need
Asset and supplier details
- Equipment specification and supplier quotation
- Cost including VAT treatment
- Delivery or installation timeline
Business information
- Trading history and recent bank statements
- Filed or management accounts where available
- Deposit available — commonly ten to twenty per cent depending on asset and profile
- Preferred repayment period
Benefits and considerations
Potential benefits
- Preserves working capital for operations
- Fixed monthly payments can aid budgeting
- Payments may align with the asset's useful life and revenue contribution
- May be more accessible than unsecured borrowing for some younger businesses
Points to weigh
- Ownership structure varies — understand what you own and when
- Missed repayments may place the asset at risk
- Total cost includes interest and charges — compare the full facility cost
- Early termination charges may apply on some agreements
Asset finance vs a business loan
A business loan provides general-purpose funding repaid over a term. Asset finance is tied to a specific purchase, with the asset providing security. For equipment acquisitions, asset finance often aligns repayments with the asset's use. For broader working capital, a loan or invoice finance may be more appropriate depending on circumstances.
How to explore asset finance with Tera
Start with Tera's two-minute assessment. Share the equipment you need, the amount and your business details. A specialist reviews your requirement and discusses suitable structures from our lender panel. No obligation to proceed. See how it works and our asset finance product page for more detail.
Common questions
Tera Business Finance is a credit broker, not a lender, and an Appointed Representative of Moorgate Broker Network. Finance is subject to status and lender terms.
