Asset finance glossary. Plain English.

AIA (Annual Investment Allowance)

A UK tax relief that allows businesses to deduct the full cost of qualifying plant and machinery from profits in the year of purchase. Currently set at £1 million per year.

APR (Annual Percentage Rate)

The total annual cost of borrowing expressed as a percentage. Includes the interest rate plus any mandatory fees. APR allows meaningful comparison between finance products.

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 (like AssetFi) that shops across multiple lenders to find the best finance deal for your circumstances. Regulated by the FCA. Paid by the lender, not the borrower.

Capital allowances

Tax deductions available on qualifying capital expenditure. On hire purchase, the asset goes on your balance sheet and you can claim capital allowances. This includes full expensing (100% in year one) on qualifying assets.

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

An FCA regulation (from July 2023) requiring financial firms to deliver good outcomes for retail customers. Applies to asset finance where the end-user is an individual or small business.

Credit broker

A regulated firm that introduces borrowers to lenders. AssetFi Ltd is authorised and regulated by the FCA as a credit broker. We don't lend directly — we find the right lender for you.

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.

FCA (Financial Conduct Authority)

The UK regulator for financial services firms, including credit brokers. All legitimate asset finance brokers must be authorised by the FCA.

Finance lease

A rental agreement where the lender buys the asset and you rent it over a fixed term. No deposit required. VAT spread across each rental. At the end: continue renting, sell, or return.

Flat rate

An interest rate calculated on the original principal for the full term, regardless of how much has been repaid. A 6% flat rate equates to roughly 11–12% APR. Always compare APR, not flat rates.

Full expensing

A UK tax relief allowing companies to deduct 100% of qualifying plant and machinery expenditure from taxable profits in year one. Available on hire purchase agreements.

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 full credit check that leaves a visible footprint on your credit file. Only performed by the chosen lender after you accept their offer. AssetFi uses soft searches at the quote stage.

Hire purchase (HP)

A finance agreement where you pay a deposit and fixed monthly instalments. The lender owns the asset during the term. At the end, you pay a small option-to-purchase fee and take full ownership.

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.

NACFB

National Association of Commercial Finance Brokers. The UK's leading trade body for commercial finance brokers. Membership requires compliance standards and ongoing professional development.

Operating lease

A rental agreement where the lender takes the residual value risk. Monthly rentals are lower because you're not paying for the full asset. You return the asset at the end.

Option to purchase

A contractual right in a hire purchase agreement to buy the asset at the end of the term for a nominal fee (typically £75–£250). This transfers legal ownership to you.

PG (Personal guarantee)

A commitment by a company director to cover the lender's loss if the business defaults. Usually limited to the shortfall after asset recovery, not the full balance.

Peppercorn rental

A minimal secondary rental charged after the primary lease term ends. Typically one month's original rental charged per year. Allows you to continue using the asset indefinitely.

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 check that does NOT appear on your credit file or affect your score. Used by AssetFi at the quote stage to assess likely lender matches.

VAT deferral

On hire purchase, VAT is due upfront but most lenders offer a 90-day deferral so it aligns with your HMRC reclaim cycle.