Asset finance or term loan – which is right for your business?

When considering finance for your small business, how do you know which product is right for you? First, it’s important to consider what you require finance for, how much you need to borrow and how flexible you would like the product to be.

At Funding Circle, our experienced Account Managers will talk you through your options to ensure you get the terms and finance structure that work best for your business.

To help you decide, here are the key differences between asset finance and a term loan, as well as a few similarities.

4 key differences between asset finance and a term loan

1. Purpose

Asset finance is finance that’s provided to purchase a specific business asset, such as commercial vehicles, plant and machinery and business equipment.

In contrast, a term loan can be used for any legitimate business purpose, including purchasing equipment, but also buying stock, expansion or managing cash flow. 

2. Security

With asset finance, the asset you’ve purchased acts as security against the loan; if you fail to meet your repayments, the lender can sell the asset to recover the funds. This means you carry less risk to the lender than term loan customers

Term loans require some kind of security, usually in the form of a personal guarantee.

3. Interest rates

Asset finance is less risky, so lenders can offer lower rates of interest.

At Funding Circle, 98 per cent of businesses who received an offer for both asset finance and a term loan were given a lower rate with asset finance – a difference of 12 per cent, on average.

4. Flexibility 

Asset finance offers more flexibility than a term loan, with a wider variety of structures available.

When you apply for asset finance through our dedicated asset finance service, our team of experts will find deals for you from a range of providers. Together we will look at what is most important to you and then structure a deal that best meets those needs.

Options include deals with low or no deposits, balloon payments or the ability to overpay or settle early. You can find out more in our blog 7 benefits of asset finance that could help your business.

Similarities between asset finance and a term loan

1. Great service 

Whether you choose an asset finance deal or a term loan, with Funding Circle you are always guaranteed exceptional service.

Once you’ve applied you’ll be assigned a dedicated Account Manager, who will listen to your needs and talk you through your options. If you decide that asset finance is right for your business, your account manager will find deals from our partners, meaning we can offer competitive rates and flexible deals.    

2. Quick decisions

See if you’re eligible in 30 seconds, apply online in 10 minutes and get a decision in as little as an hour.

If you’re approved you’ll get a personalised no-obligation quote. Once you accept your offer, we’ll deposit funds in your account typically within 48 hours. 

How to apply at Funding Circle

Through our panel of trusted advisors, you could get an asset finance deal of up to £5 million, with terms of between 1 and 7 years. Or, direct through Funding Circle, we offer term loans of up to £500,000 for terms up to 6 years.

We’ll always look to get you the right product for your business. When you apply for asset finance through Funding Circle we can assess you for a term loan at the same time, saving you time and effort. If we believe one of our other products would be a better fit for you, we’ll let you know. 

Find out more about how we can help you get finance that works for your business.

01/07/24: While we want to help as much as we can, the information found here is provided solely for informational purposes and should not be considered financial or legal advice. To the extent permitted by law, Funding Circle does not accept any liability for any loss or damage which may arise directly or indirectly from the use of, or reliance on, the information contained here. If you have any questions, please speak to your professional adviser or seek independent legal advice.