Asset finance dictionary
Asset finance glossary
Clear definitions for finance terms business owners see when comparing vehicles, machinery, equipment and working capital.
Asset Finance
A way for a business to fund vehicles, machinery or equipment over time instead of paying the full cost upfront.
Hire Purchase
A finance agreement where the business pays for an asset over time and usually owns it once all payments are complete.
Finance Lease
A lease structure that gives the business long-term use of an asset while spreading the cost through rentals.
Contract Hire
A vehicle funding arrangement focused on fixed-cost use and return rather than ownership.
Balloon Payment
A larger final payment deferred to the end of an agreement, often used to reduce monthly payments.
Residual Value
The estimated value of an asset at the end of a finance or lease agreement.
Working Capital
Money available for day-to-day business costs such as wages, stock, tax, suppliers and operating expenses.
Asset Refinance
A way to release capital from vehicles, machinery or equipment already owned or financed by a business.
VAT Finance
Funding used to spread VAT payments or the VAT element of a large asset purchase.
Personal Guarantee
A promise from an individual, often a director, to meet repayment obligations if the business cannot.
Soft Asset
An asset that may have a lower resale value or shorter useful life, such as some IT, software or fit-out items.
Hard Asset
A physical asset with identifiable resale value, such as vehicles, plant, machinery or agricultural equipment.
APR
Annual Percentage Rate is a standardised annual cost measure that can help compare credit, but it may not tell the whole commercial story on business finance.
Flat Rate
A flat rate is calculated against the original amount borrowed and is not the same as APR, so the two should not be compared as if they are identical.
Option Fee
A small fee sometimes payable at the end of a hire purchase agreement before title passes to the customer.
Title
Title means legal ownership of an asset. In finance agreements, title may remain with the lender until the agreement conditions are met.
Supplier Invoice
A supplier invoice or quote confirms the asset, price, seller and VAT position so lenders can understand what is being funded.
Underwriting
Underwriting is the lender review process covering affordability, credit profile, asset, supplier, documents and overall lending risk.
Soft Search
A soft search is a credit check that may be visible to you but is generally not seen by other lenders in the same way as a full application search.
Hard Search
A hard search is a formal credit search usually recorded on a credit file and visible to other lenders.