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Overview of Lease Finance

Lease Finance, more commonly Equipment Finance is a financial product used by UK businesses to access expensive assets required to thrive. Effectively, these assets are paid for by renting them in the form of regular payments over an agreed period from a lender who owns the asset. 


There are two main types of equipment lease, these are operating lease and finance lease.


Equipment Lease can be used to fund almost anything your UK SME needs to grow. Ranging from hard assets such as lorries and heavy machinery to soft assets like IT equipment or gym equipment. Equipment Lease can even be used to fund intangible assets such as software or even intellectual property (IP)


Equipment Lease, Finance Lease and Operating Lease are explained in more detail below. 

Definitions Associated with Lease 

Asset –   a resource with economic value that provides a future benefit. An asset is listed on a firm’s balance sheet. In finance an asset will be further categorised into hard and soft assets, generally speaking a hard asset has a reasonable resale value such as a vehicle whereas a soft asset’s resale might be more difficult such as IT, refurbishment costs or telephone systems.   


Lessee -  a person who has the right to use the asset, if you’re reading this, you or your business will be the lessee.


Lessor – a person who allows someone use of an asset, in this case, one of our 30 lenders.


Term –  the agreed period of the arrangement,  at GSM we are able to arrange a term of as little as 12 months or as long as 60 months.

Interest Rate -  the price of money over time

Asset Finance Equipment Leasing allows the lessee to use an asset with most of the associated risks and rewards attached to the asset on the same basis as an owner, but never actually owns the asset.

Finance Lease

Finance lease is a type of equipment lease. The business or lessee rents the asset for most of the item’s useful life. By the end of the term, all of the monthly payments will add up to the full cost of the asset plus the interest set by the lender. 


In many ways, it is similar to Hire Purchase but there are differences mainly seen on a business's balance sheet. A finance lease is more similar to hire purchase than an operating lease.



With most lenders at the end of a finance lease, you will have the option to buy the asset from the lessor for a nominal sum, return the asset to the lender or refinance the asset to release funds back into the business.

Operating Lease

An operating lease is another type of equipment lease. The business or lessee rents the asset for only a portion of its working life span. Effectively this method of lease allows UK SMEs to rent expensive yet essential assets over a period where the asset is beneficial to the business then return it when it no longer is. This can be beneficial for industries where technology develops fast and the business needs to upgrade to remain competitive, or for businesses who only need an asset for a short period of time.


At the end of the term, businesses can either return the asset and end the contract or upgrade the asset and start a new contract.

Equipment Lease Rates

No two UK SMEs are the same. UK SMEs come in a range of shapes and sizes, as such, we are able to tailor an asset finance package to suit your business. We are able to quote any UK SME on any asset, and we can do so in as little as an hour and have funding available within 24 hours. However, because every business varies in size, financial strength, operation and industry there is no one interest rate that we can provide here.


However, depending on your business and the asset, we have lenders that will be able to arrange finance from as low as 3%, this is indicative rate based on a minimum risk business.


When clients come to GSM Finance to arrange asset finance, our brokers consider a huge number of variables, these include profitability, trading history, type of asset, amongst other considerations. Our brokers, with their decades of experience, will know how to best package your proposal to a lender to achieve the best possible rate.



Some businesses and their owners prudently obsess over interest rates and in some ways they are right to do so. However, even if the interest rate is in the double digits, lessors give you an option to access assets through hire purchase that you otherwise wouldn’t be able to benefit from. If the asset you are investing in through equipment lease can generate significant revenue over the monthly repayments then you stand to benefit.

Help your business reach its ambitions with alternative funding on assets from £10,000 to £5,000,000

Benefits of Equipment Lease

  • Instant access to the asset

  • Either spread the cost of an asset over it’s working life or rent an essential item over the period it is useful to you

  • Upgrade the asset at the end of the term  

  • Deploy the use of an asset and avoid the drain on working capital

  • Fixed rate funding allowing you to incorporate payments into cash flow forecasts

  • Tax efficient as you can reclaim the monthly VAT charges and offset repayment interest against profit

  • Highly accessible to all UK SMEs who may otherwise not be able to raise funds 

  • Payments can be spread monthly, quarterly or even seasonally and can be tailored to your businesses needs.

If your business needs equipment which would otherwise be unaffordable, Finance Lease could be the perfect solution.

Tax Associated with Equipment Lease

Since you are not the owner of the asset, for VAT purposes equipment lease are considered a supply of services. Unlike Hire Purchase, you are not required to pay the full amount of VAT upfront of the asset, instead, you pay VAT on your regular payments.


The cost of leasing an asset is deductible as a business expense so this can reduce your overall tax bill.

 Time Frame and Process

Clients who come to GSM benefit from access to funding in as little as 24 hours.​

  1. Fill out our online Quote form found here.

  2. One of our brokers will telephone you to discuss your Hire Purchase needs and find out more about your business and its plans.

  3. Email over required documents that we need to take to our lenders, this usually is management accounts, end of year accounts and a Statement of Assets and Liabilities.     

  4. Our finance brokers get hard to work finding the right lender for your business, tailoring it to your needs, desired term and payment structure.

  5. Your dedicated finance broker proposes a hire purchase agreement, providing you with the monthly repayments for your asset.  

  6. If you accept our offer, we will arrange with the lessor to pay your supplier, who will deliver the asset to you.

  7. You have immediate use of the asset and you pay back the lessor on the agreed terms.

  8. We are here to help throughout your agreement with the lessor and here for any help you may need afterwards.

Hire Purchase and Lease Comparison

Hire Purchase
Monthly or Quarterly
Monthly or Quarterly
2-5 Years
2-5 Years
Lessee after final instalment is paid
VAT Paid
Fixed Term
Claim against Capital Allowance
Can't claim against Capital Allowance
Fixed Rate
VAT Reclaimable
All on Day 1
Repair and Maintenance
Lessee Responsible
Lessor Responsible
Tax Impact
Claim the depreciation and interest payments on the asset as an expense
Lease payments are shown as an expense
Yes as a Sale and Hire Purchase Back
Yes as a Sale and Lease Back

When you should use Hire Purchase Instead of Leasing 

Sometimes hire purchase may be preferable to equipment lease when you are looking to take out asset finance.  One major benefit of Hire Purchase is that you retain the right of ownership with the cost spread over the term. If you can afford the upfront cost of the VAT then this may be a preferable option.


Additionally, since you effectively own the asset and are simply spreading the cost, if the working life of the asset is longer than the agreed term then you can continue using the asset once the term is over.  You can also deduct a proportion of the cost from your taxable profits each year under capital allowances. 



The other consideration is the tax implication of each with its different advantages, depending on your business aims and position. Your accountant or finance director can best advise which is preferable for your business.

When should you use a loan

At GSM Finance we are also able to secure a business loan for your SME. Sometimes your business just needs additional cash to cover various things. A straight business loan gives you greater flexibility over what you spend your loan on. It can cover things such as salary, rent and stock or even an asset if needs be. Asset finance generally covers spends over £10,000, so if you’re looking at an asset less than this a business loan may be better suited. Although loans are generally harder to secure than hire purchase or leasing, even if your bank has turned your application down, we have lenders who will be happy to support your business's growth.  

Why use an asset finance broker for your lease?

Anything we buy today whether it be internet or holiday insurance, we endlessly compare what the market has to offer. In the insurance and internet industries, their offering has limited variables and is comparatively straight forward and so easily comparable using comparison websites. However, comparing equipment lease or asset finance isn’t as straight forward, no small to medium business is the same and so a one size fits all never applies. An equipment lease deal is dependent on a huge range of factors, from the obvious such as the price of the asset to your turnover to your forecasts. Lots of different factors influence an equipment lease deal.


When looking for equipment lease you could go directly to a lender, fill out all the required paperwork and then start the process of toing and froing to hammer out the finer details. If you repeat this process with three or four other lenders, you may then have a few deals to compare. However, you may find that some lenders may not offer you asset finance. You may see huge differences in the lease rates that lenders offer and question why or how that can be. You then might be tempted to take your proposition to yet another lender, while at the same time your business to do list lengthens.


At GSM Finance, we have a book of 30 lenders, and put deals together day in day out. We have specialist knowledge of the market and decades of equipment lease experience. This allows us to take your business proposition and package it to not only ensure your hire purchase gets approval but also to get the best rate from that lender. Knowledge of the market allows us to take your offering to the right lenders, some lenders favour retail while others favour IT, some are comfortable doing equipment lease on soft assets whilst others won’t. This will help explain if you tried to do it yourself why you got such varied rates.


When you come to GSM Finance, our brokers take the time to fully understand your business upfront, we then take care of all the leg work. Our brokers will save you time and hassle while at the same time getting your business the funding it requires to grow. 

If you want to find out more about hire purchase or would like an indicative quote give us a call on

020 8874 9994.

Talk to us.

For the assets your business needs to secure its future, for a loan to secure its present or for equity from assets secured in the past. We can help.  Contact the team today on:

020 8874 9994

Please fill out the short form below if you require funding for any asset type, unsecured loan or refinance of already purchased assets from £10k to £5m

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