What finance types are available (asset finance, hire purchase, term loans, refinance)?
Short answer
UK businesses can access a wide range of finance types including asset finance (leasing and hire purchase), term loans, and refinance or debt consolidation options. Each product suits different needs—buying equipment, managing cash flow, or restructuring existing borrowing—and terms, security and costs vary by lender. Best Business Loans helps match your business to suitable lenders or brokers so you can compare options quickly and confidently.
Asset finance: what it is and when it helps
Asset finance is a category of lending that lets businesses acquire equipment, machinery, vehicles or technology without paying the full purchase price up front. Lenders use the asset value as security and structure payments over a set term, which preserves working capital and spreads cost.
Common forms include leasing, finance leases and hire purchase. Leasing is effectively renting the asset for a fixed period with the option to return or buy it at the end, while finance leases and hire purchase often transfer more of the ownership-like benefits to the borrower during the term.
Typical users include manufacturers, logistics firms, construction businesses and any company needing specialist equipment. Asset finance is particularly useful where assets retain resale value and when you prefer predictable monthly costs tied to the asset’s working life.
Types of asset finance and key differences
Operating lease: the lender retains ownership and you pay to use the asset; maintenance may be included. Finance lease: long-term hire where you take on most of the risks and rewards of ownership, often with a final purchase option.
Hire purchase: you pay an initial deposit and then instalments; ownership transfers when the final payment is made. Asset refinance (releasing equity from owned assets) is also possible via asset-backed lending.
Advantages include lower upfront cost, VAT-efficient structures in some cases, and tailored terms to match asset life. Disadvantages can include higher total cost than outright purchase and lender restrictions on asset use or transfer.
Hire purchase explained in detail
Hire purchase (HP) is a specific asset finance route where you hire an asset over fixed monthly instalments and own it when the last payment is made. HP is straightforward and commonly used for cars, vans, plant machinery and commercial equipment.
HP structures usually require a deposit, then a series of fixed repayments; interest and fees are included in the instalments. Unlike leasing, HP is designed to end with ownership, which suits firms wanting an asset on their balance sheet after the term.
From an accounting viewpoint, modern lease accounting rules and HP treatment differ, so speak to your accountant about capital allowances, depreciation and VAT recovery. HP is often available to established limited companies and asset-rich businesses with predictable cashflows.
When hire purchase is a good option
Choose HP when you want to own the asset outright at the end of the term and when budgeting certainty is important. It suits businesses that expect to use the asset for several years and who can afford a modest deposit to reduce monthly costs.
HP can sometimes be cheaper than leasing for long-term ownership, but it may carry fewer tax or maintenance benefits. If you want flexibility to upgrade frequently, consider operational lease alternatives instead.
Term loans: flexible capital for many business needs
Term loans provide a lump sum repaid over a fixed period with interest and can be secured or unsecured. They are one of the most common routes for growth projects, purchase of inventory, premises fit-out and longer-term working capital.
Short-term loans (months to two years) are often used for seasonal working capital or bridging finance. Medium-to-long-term loans (two to ten years or more) fund investments like equipment and expansion where repayments match return on investment.
Interest rates, arrangement fees and security requirements vary widely across banks, challenger lenders and specialist creditors. Secured loans usually offer lower rates but put business or assets at risk if you default, so consider the trade-off carefully.
Types of term loans and lender sources
High-street banks: typically competitive rates but stricter criteria and longer decision times. Challenger banks and online lenders: faster decisions and flexible underwriting for growing SMEs, often at higher rates.
Peer-to-peer or marketplace lenders: an alternative for businesses that need speed and smaller loan sizes. Specialist lenders: industry-specific financing for sectors such as agriculture, haulage or manufacturing where asset longevity and sector risk are well understood.
Refinance and consolidation: when to rethink existing borrowing
Refinance means replacing one or more existing finance agreements with a new facility, usually to reduce cost, extend term, or simplify repayments. Consolidation combines multiple debts into a single loan to improve cashflow visibility and potentially secure better rates.
Common drivers for refinance include rising interest costs, maturing facilities you cannot renew on acceptable terms, or a desire to move from short-term to longer-term finance. Lenders will review your business performance, asset values and credit history during the refinance process.
Refinancing can release equity tied up in assets or consolidate several high-cost facilities such as overdrafts, merchant cash advances, or short-term loans. It can improve liquidity but may also carry early repayment charges or arrangement fees that you should weigh carefully.
Practical steps to refinance successfully
Step 1: collect your current loan agreements, balances, interest rates and any early repayment penalties. Step 2: review your cashflow forecast and define the objective—lower cost, extended term, or different security.
Step 3: compare offers from multiple lenders and ask about total cost of borrowing over the proposed term. Step 4: consider professional advice from a broker or accountant to identify tax or covenant impacts.
How to choose the right product and next steps
Start by matching the funding purpose to the product: buy an asset (asset finance or hire purchase), fund growth or acquisition (term loan), or tidy up multiple debts (refinance). Prioritise realistic cashflow modelling so repayments are sustainable under stress scenarios.
Assess security, term length, total cost, and any operational restrictions lenders impose. Check whether you need ownership at term end, which affects whether hire purchase or leasing is appropriate, and whether maintenance or replacement obligations are included.
Best Business Loans does not supply loans. We act as an independent introducer that uses AI-matching and a panel of lenders and brokers to identify suitable routes for your business. Our service is free to submit and helps you get a Quick Quote, Decision in Principle or eligibility check faster.
Call to action — get started with a Quick Quote
If you’re unsure which route is best, submit a Quick Quote to see matched options from lenders actively lending in your sector. It only takes a few minutes and does not commit you to borrowing, but it does help you compare realistic proposals and next steps.
For businesses investing in energy efficiency or low-carbon equipment, we also help find specialist funding and sustainability-linked finance options. Learn more about those options on our sustainability loans page: Sustainability Loans.
Key takeaways
Asset finance and hire purchase are ideal for buying equipment without a large upfront outlay, with flexibility depending on whether you want ownership at term end. Term loans provide lump sums for growth and working capital and come in short, medium and long-term varieties. Refinance and consolidation help restructure and reduce the cost of existing borrowing if commercial terms improve or debt is fragmented.
Decide by matching purpose, cashflow ability and appetite for security. Use a data-driven introducer like Best Business Loans to compare lenders quickly and understand likely outcomes before you apply.
About Best Business Loans and compliance
Best Business Loans is an independent introducer helping UK businesses find suitable commercial finance providers using AI-driven matching. We do not provide credit, and any lender contacted will make the final credit decision and provide full terms.
Our content is designed to be clear, fair and not misleading in line with FCA and ASA principles. Always review lender terms and seek professional advice for tax or accounting treatment before signing contracts.
Frequently asked questions
Q: Who can use asset finance? Asset finance is usually available to established limited companies and businesses with trading history and positive cashflow. Lenders assess the asset, your sector and financial position.
Q: Will refinancing always save me money? Not always; savings depend on interest rates, term length and early repayment charges. Calculate total cost over the remaining and new terms to decide.
Q: How long does a Quick Quote take? Our Quick Quote form takes a few minutes and helps our AI match you to suitable lenders or brokers for a Decision in Principle or eligibility check.
Contact: hello@bestbusinessloans.ai • Website: https://bestbusinessloans.ai