Asset finance vs business term loan: which to use
Asset finance is secured on the equipment it funds, so it is usually cheaper and easier to approve for buying plant, vehicles or machinery. A business term loan is unsecured cash for any purpose, faster for asset-light needs but priced higher because it relies on credit standing and a guarantee. Match the product to whether the money buys an asset.
Founder & Managing Director, Muswell Rose, FundBiz
Adam is the founder and managing director of Muswell Rose and a founder of Best Business Loans Ltd, the company behind FundBiz. His background runs through commercial finance, mortgages and fintech, including as managing director of an invoice finance business. He oversees FundBiz's specialty finance comparison and the logic behind how businesses are matched to lenders.
Last reviewed: 29 June 2026
How asset finance works
Asset finance funds a specific physical asset, with the asset acting as the security for the facility. Under hire purchase you pay a deposit and fixed instalments and own the asset at the end; under a lease you pay rentals for its use. Because the lender can recover the asset on default, the underwriting leans on the asset rather than purely on trading history, which makes it accessible to growing or asset-heavy businesses. The same structure runs in reverse as asset refinance, releasing cash from equipment you already own.
How a business term loan works
A business term loan is a fixed amount lent on day one and repaid in equal instalments over a set period, typically one to six years, with interest charged on the outstanding balance. It is usually unsecured against any specific asset but backed by a director guarantee, so the underwriting is credit-led: company standing, trading position and affordability. It suits any one-off need where the use of proceeds is not a single resellable asset, such as a marketing push, a fit-out or working capital.
Side by side
| Feature | Asset finance | Business term loan |
|---|---|---|
| Security | The funded asset itself | Usually unsecured plus guarantee |
| Use of proceeds | Specific equipment or vehicles | Any business purpose |
| Typical cost | Lower, asset normalises pricing | Higher, reflects unsecured risk |
| Underwriting lean | Asset value and serviceability | Credit standing and affordability |
| Speed | Days, plus valuation step | Often one to two days |
| Best ticket band | Equipment from a few thousand up | Asset-light needs, often to £250k |
| Where to apply | FundBiz panel | Mainstream bank or lender |
Figures are typical illustrative ranges, not quotes. Your terms depend on the asset, trading history and lender.
When asset finance wins
Asset finance is the better fit when the money buys a specific, resellable asset such as a vehicle, machine or piece of plant. It usually prices below an unsecured term loan for the same business, can extend over a longer term matched to the asset life, and is more tolerant of a thin trading history or impaired credit because the asset carries the risk. It also lets you preserve cash and unused borrowing headroom for everything else the business needs.
When a business term loan wins
A term loan is the better fit when the need is not a single asset: working capital, a marketing campaign, a fit-out or bridging a gap. It is faster for asset-light businesses because there is nothing to value, and it leaves your equipment free of a lender charge so you can refinance it separately later. Where the choice is really secured against assets versus unsecured, see asset-backed vs unsecured.
Frequently asked questions
Is asset finance cheaper than a business term loan?
For acquiring equipment it usually is, because the asset secures the facility and reduces the lender's loss on default, so the rate prices more tightly than an unsecured term loan for the same business. A term loan can still win on total cost for asset-light needs where there is no equipment to secure, since arranging an asset facility adds valuation steps. Compare the total cost over the real term rather than the headline rate.
Can I use a term loan to buy equipment instead of asset finance?
Yes, and sometimes it makes sense, for example when the equipment is low value, hard to resell or you want to keep it free of a lender charge. But for higher-value plant, vehicles or machinery, asset finance is usually cheaper and easier to approve because the asset itself is the security, so the underwriting leans less on trading history and credit standing.
Does asset finance appear on my balance sheet?
Under hire purchase the asset is on your balance sheet from day one and you can claim capital allowances. Under a lease the treatment depends on the lease type and your reporting standard, with most leases now recognised on the balance sheet under IFRS 16 or FRS 102. A term loan sits as a liability and any equipment you buy with it is your asset. Your accountant should confirm the treatment before you sign.
Which is faster to arrange?
An unsecured term loan from a fintech lender can decide within a day or two because there is no asset to value. Asset finance adds a valuation or invoice-verification step, so it is often a few days slower, though for standard vehicles and common plant it can still complete inside a week. If speed is the priority and the need is asset-light, the term loan usually wins.
Check what you qualify for
Tell us the asset or the need and your trading profile, and we will show you whether asset finance or an unsecured route prices better for your file.
Open the eligibility checker →Limited companies, LLPs and partnerships of 4+ only.
This is general information, not financial advice. FundBiz works with limited companies, LLPs and partnerships of four or more. Last reviewed: 29 June 2026.