Equipment finance: how it works and how UK providers compare

Equipment finance lets your company spread the cost of machinery, vehicles or IT over a fixed term, usually through hire purchase or a lease, with the equipment used as security. Repayment terms can run up to seven years, while rates, conditions and types of financing vary between lenders.

Below, we compare five of the top UK providers, exploring the options offered, how they work and the terms published (checked on 12 October 2026), while discussing when a business loan might suit better.

Leasing and hire purchase were used by 12% of smaller UK businesses in Q3 2025, the third most-used type of external finance after credit cards (19%) and overdrafts (16%), according to the British Business Bank's Small Business Finance Markets 2025/26.

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How equipment finance works

A lender buys or funds one specific asset and your company repays it in fixed instalments over an agreed term, with the asset acting as the security. Whether you own it at the end depends on the agreement: hire purchase leads to ownership, but a typical lease doesn't.

There are three main types of equipment finance (outlined and compared below):

If you want more detail, we have a range of guides to explore which explain hire purchase, how hire purchase and a finance lease differ and finance lease and operating lease compared.

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VAT and tax: hire purchase vs leasing

On hire purchase you usually pay the VAT on the full price at the start and can claim capital allowances, because your company is treated as buying the asset. On a lease, VAT is added to each rental and the rentals are a business cost instead.

HMRC doesn't let you claim plant and machinery allowances on things you lease, unless it's hire purchase or a long funding lease (gov.uk: what you can claim on). Most companies can deduct the full cost of qualifying plant and machinery up to the annual investment allowance of £1m. HSBC, for example, points out that leasing spreads the VAT across the rentals rather than charging it upfront. Tax depends on your company's situation, so check the treatment with your accountant before you sign.

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What equipment can you finance?

Most tangible business assets with a resale value can be financed, new or used. That covers plant and machinery, commercial vehicles, IT hardware and kit for sectors like catering, medical and farm equipment.

Soft assets that hold little value, such as software or fit-out costs, are harder to fund this way. Lloyds, for example, lists plant and machinery, agricultural and construction equipment, food manufacturing equipment and office IT.

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How we compared the providers

We compared providers only on what each publishes on its own website: how much it lends, for how long, its published fees and who can apply. Rates aren't included in the table, because every provider featured prices each deal individually.

Our criteria:

• Amount – the published minimum and maximum, or the share of the price funded.
• Term – the shortest and longest agreement.
• Fees – any arrangement, set-up or option-to-purchase fee the provider states.
• Who can apply – the provider's own published criteria, which differ from lender to lender.

iwoca doesn't offer asset or equipment finance, so we're not featured in the table. All details are checked against what's published on the providers' own websites on the date shown.

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Equipment finance providers compared

So, here's our comparison of five top equipment finance providers in the UK, including Lloyds Bank, Barclays (through Propel), Lombard, Funding Circle and Ultimate Finance. Their published limits run from £5,000 to £5m, over terms of up to seven years.

There's more choice beyond the big banks these days. Challenger and specialist banks provided 60% of gross small business bank lending in 2025 (British Business Bank). In iwoca's SME Expert Index (Q2 2026), 75% of brokers agreed high street banks are reducing their appetite for funding small businesses.

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Another option to consider: HSBC Equipment Finance

HSBC's asset finance is provided by HSBC Equipment Finance (UK) Ltd and covers hire purchase, leasing and asset loans, plus Green Asset Finance. HSBC doesn't publish amounts or terms online, so you'd get a quote through a relationship manager.

HSBC says its asset finance is for businesses planning significant capital spending each year. Its leasing spreads the VAT across each rental, and its asset loan suits cases where there's no asset to take title to. Green Asset Finance covers lower-emission assets through hire purchase, a commercial loan or a finance lease.

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Providers that quote case by case

Several specialist lenders, including Aldermore, Close Brothers Asset Finance and BNP Paribas Leasing Solutions, fund equipment but don't publish limits, so they're not in the table. Equipment dealers often offer their own finance, and brokers can search a panel of lenders for you.

Bibby Asset Finance says it funds assets up to £5m, but doesn't publish terms or fees. If you use a broker, ask which lenders are on its panel and how it's paid.

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What do equipment finance lenders look for?

Lenders check your company's accounts and bank statements, its trading history and turnover, its credit record (and that of its directors), and the asset itself (and its value). Each sets its own thresholds: Lloyds, for example, asks for turnover of more than £100,000 and at least 13 months' trading.

Before you apply, have the following info and documents ready:

• Your latest accounts and recent business bank statements
• A quote or invoice for the equipment, with the supplier's details
• Details of any finance you already have, including other hire purchase agreements
• A deposit, if the lender won't fund the full price

Equipment finance lenders also look at your company's credit history, so it's worth checking what shape it's in first. iwoca's Credit Compass lets you check your company's credit score for free, using Equifax data updated monthly.

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How much does equipment finance cost?

The cost depends on the interest rate the lender offers your company, the deposit, the borrowing term and the various fees, so compare the total amount repayable, not just the monthly payment. Published fees vary. For example, Lloyds is waiving its £200 arrangement fee on online applications until 31 December 2026.

When you compare quotes, check:

• The rate and how it's quoted – ask for the APR or total cost, as a flat rate can look lower than it is.
• The deposit – Lloyds, for example, funds up to 90% of the price on hire purchase.
• Fees – arrangement or set-up fees and the option-to-purchase fee at the end. Ultimate Finance and others charge both.
• A final balloon payment – it lowers the monthly payments but leaves a lump sum at the end.
• Fixed or variable – Lombard offers both. With a fixed rate you may pay extra to settle early.

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Can you finance used equipment and refinance assets?

Yes, many lenders fund used equipment, but they check its age, condition and resale value first. If you already own equipment, refinancing or a sale and hire purchase back can release cash tied up in it.

• Used kit – Lloyds finances new or used equipment on hire purchase and finance leases. Used kit bought privately or at auction can be harder to fund this way, because the lender needs to value and vet the asset and the seller.
• Refinancing – Lloyds can lend up to 90% of the value of equipment you've bought with cash or an overdraft in the last six months, if you're VAT-registered. Funding Circle's panel refinances assets valued at £10,000 or more.

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Construction and plant equipment finance

Construction firms can finance diggers, excavators, cranes, telehandlers and access platforms through the same routes: hire purchase, leasing or refinancing. Lloyds, Aldermore, Funding Circle's panel and BNP Paribas all list construction or plant equipment among the assets they fund.

Project work brings its own pattern. If you need a machine for one contract, a short lease or plant hire can cost less than buying. If you'll use it on every job for years, hire purchase builds ownership. Used plant is common in construction, so expect the lender to check its age, hours and condition.

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Asset finance or a Flexi-Loan: What might suit you better?

For a large, long-life asset, asset finance is often the better choice: the equipment secures it and terms can run longer. iwoca doesn't offer asset finance, but a Flexi-Loan can cover the parts asset finance doesn't, such as a deposit, the upfront VAT on hire purchase, used kit from a private seller or a smaller purchase.

Here's a brief comparison:

When asset finance may be the better choice:

• The asset is expensive and will last – heavy plant, production machinery or vehicles.
• You want the asset to be the security, rather than a director's personal guarantee.
• You'd rather spread the VAT through a lease, or claim capital allowances through hire purchase.
• Because the equipment secures it, asset finance can cost less than unsecured borrowing of the same size and term. Compare the total repayable on both.

When a Flexi-Loan can fit:

• Paying the deposit on a hire purchase agreement.
• Covering the upfront VAT on hire purchase until you reclaim it.
• Buying used kit privately or at auction, where asset finance is harder to arrange.
• Smaller purchases, or kit plus installation and training that asset finance won't cover.

A Flexi-Loan is a business loan with flexible repayment options: once you're approved, you can draw down up to your limit and top up later. It's for UK limited companies only.

No asset is taken as security at the start, but every new Flexi-Loan needs a personal guarantee from at least one director. Interest is charged only on what you owe, and our business loan calculator shows what you'd repay.

For a more in-depth comparison, read our asset finance vs an unsecured business loan article.

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What to do before you sign an equipment finance agreement

The equipment can be repossessed if you miss payments, and you're usually responsible for insuring and maintaining it. Check what early settlement costs, what happens at the end of the term and whether the lender wants a personal guarantee.

Consider the following before signing an agreement:

• Repossession – Lloyds and Lombard both warn that assets may be repossessed if you don't keep up repayments.
• Upkeep – maintenance, repairs and insurance are usually your company's job, even on a lease.
• Early settlement – fixed-rate agreements may charge extra to settle early.
• End of term – check the option-to-purchase fee, any balloon and whether a lease rolls on automatically.
• Guarantees – Lombard says security, guarantees or indemnities may be required. Ask before you apply.

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Equipment finance FAQs

Is an equipment finance agreement a loan?

Hire purchase works much like a secured loan for one asset: you pay it off and then own it. A lease is closer to long-term rental, because the lender keeps ownership throughout.

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How long can you finance equipment for?

Published terms in our table above run from 12 months up to seven years, and lenders usually match the term to how long the equipment will stay useful. Barclays and Funding Circle publish terms of up to seven years, while Lombard and Ultimate Finance go up to 84 months.

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Should you lease or buy business equipment?

Leasing suits kit you'll replace often or only need for a while, because you hand it back and VAT is spread over the rentals. Buying, outright or on hire purchase, suits long-life equipment you'll use for years and want to own.