Asset finance glossary. Plain English.

AIA (Annual Investment Allowance)

A capital-allowance relief that may allow a business to claim qualifying plant and machinery expenditure, subject to HMRC rules, the applicable limit and the business’s circumstances. Tax treatment should be confirmed with a tax adviser.

APR (Annual Percentage Rate)

A prescribed way of expressing the annual cost of certain credit agreements. Whether APR is available or appropriate for a proposed asset-finance agreement depends on the product and regulatory context; review the formal documentation.

Asset

Any physical item of value used in a business — vehicles, machinery, equipment, IT hardware. In asset finance, the asset itself acts as security for the facility.

Balloon payment

A larger final payment at the end of a hire purchase or loan agreement. Reduces monthly payments during the term but means a lump sum is due at the end. Also called a 'residual value' or 'guaranteed minimum future value (GMFV)'.

Broker

An intermediary that introduces potential borrowers to finance providers. AssetFi is a trading style of Vernova Finance Ltd, an Appointed Representative of AFS Compliance Ltd. AssetFi is paid by commission from a finance provider and does not charge customers a fee for its brokerage service.

Broker commission

Payment a broker may receive from a finance provider for introducing a customer or arranging an agreement. The basis of any commission and relevant agreement terms should be explained before you decide whether to proceed.

Capital allowances

Tax relief available on qualifying capital expenditure under HMRC rules. Availability and amount depend on the asset, expenditure, entity, agreement and current rules. Take tax advice before relying on a specific outcome.

CCJ (County Court Judgment)

A court order registered against you or your business for an unpaid debt. CCJs make mainstream lending harder but specialist lenders can still fund — usually at higher rates and deposits.

Consumer Duty

FCA rules and guidance intended to help firms deliver good outcomes for retail customers. Application to a proposed agreement depends on the product, customer and regulated activity.

Credit broker

A firm that introduces potential borrowers to finance providers. AssetFi is a trading style of Vernova Finance Ltd, an independent asset finance broker and not a lender, and is an Appointed Representative of AFS Compliance Ltd. Provider availability, agreement terms and outcomes depend on the proposed agreement and circumstances.

Deposit

An upfront payment made at the start of a finance agreement, typically expressed as a percentage of the asset value. Higher deposits reduce monthly payments and may unlock better rates.

Eligibility

Whether a provider may consider an application. It can depend on the asset, deposit, trading history, financial information, credit profile, security and the provider’s current criteria. An enquiry does not confirm approval.

FCA (Financial Conduct Authority)

The UK regulator for financial services. A finance business may be authorised by the FCA or act as an Appointed Representative of an authorised principal. Check the Financial Services Register for the specific firm and permissions.

Finance lease

A rental-based asset-finance structure. Deposit, VAT timing, rentals, legal ownership, tax treatment and end-of-term options depend on the agreement, provider, asset and customer circumstances.

Financial promotion

A communication that can invite or induce someone to engage in financial activity. Financial promotions must be clear, fair and not misleading in the relevant regulatory context.

Flat rate

A way some providers describe interest calculated by reference to the original amount financed. A flat rate and APR are not directly interchangeable without the full agreement terms, fees, payment profile and calculation method.

Full expensing

A first-year capital-allowance relief available to companies for certain qualifying new and unused plant and machinery, subject to HMRC conditions and exclusions. It is not a general rule for every asset-finance agreement.

Hard asset

A physical asset with strong residual value and a clear secondary market — vehicles, plant, machinery, agricultural equipment. Hard assets attract better finance rates than soft assets.

Hard search

A credit search that may be recorded on a credit file. Whether a hard search is needed, when it is carried out and its likely effect should be explained before it is undertaken.

Hire purchase (HP)

A finance structure under which ownership may transfer after the contractual payments and any applicable option-to-purchase conditions are met. Deposit, VAT, fees, term and ownership conditions depend on the agreement.

LTV (Loan to Value)

The amount being lent as a percentage of the asset's value. A £40k loan on a £50k asset = 80% LTV. Lower LTVs reduce lender risk and may unlock better rates.

Operating lease

A leasing structure where residual-value and return arrangements may be part of the agreement. Rentals, return conditions, wear-and-tear obligations and end-of-term options depend on the provider and contract.

Option to purchase

A contractual provision that may allow the customer to acquire an asset at the end of a hire-purchase agreement, subject to the specific agreement terms and any applicable fee.

PG (Personal guarantee)

A commitment that may require an individual to meet obligations if the business does not. Scope, cap, enforcement and interaction with asset recovery depend on the guarantee and finance agreement. Obtain independent legal advice before signing.

Peppercorn rental

A term sometimes used for a low-value secondary rental period after a lease’s primary term. Availability, price and duration depend on the agreement and provider.

Residual value (RV)

The estimated value of the asset at the end of the finance term. Affects balloon payments, operating lease rentals and the lender's risk assessment.

Refinance

A new finance agreement arranged against an asset you already own. The lender takes a charge over the asset and advances cash to you. You repay over a fixed term while retaining full use.

Rule of 78

A method for calculating early settlement rebates. Allocates more interest to earlier months, meaning settling early in the term saves more than settling late.

Sale and leaseback

You sell an owned asset to a lender and lease it back. Cash arrives as a lump sum. You continue using the asset and make fixed monthly lease payments.

Soft asset

Equipment without a strong secondary market — IT hardware, furniture, catering equipment, gym kit. Soft assets attract higher rates and lower LTVs than hard assets.

Soft search

A credit-search method that may not be recorded in the same way as a hard search. The provider, purpose and effect should be explained before any credit-search activity is undertaken.

VAT deferral

A possible arrangement for the timing of VAT payments. Availability, timing and suitability depend on the agreement, provider and the customer’s tax position.