Need new equipment, machinery, or vehicles but worried your credit history will hold you back? The good news is that asset finance is one of the more accessible funding options for UK businesses with bad credit, because the asset itself acts as security, reducing the risk for the lender. Keep reading to find out how it works, what to expect, and whether it's the right fit for your business.
What is asset finance?
Asset finance is a type of business funding that allows you to acquire equipment, machinery, or vehicles without paying the full cost upfront. Instead of using cash reserves, you spread the cost over time through fixed repayments, using the asset itself as collateral.
This makes it different from a standard unsecured business loan, where no specific asset backs the borrowing. Because the equipment or vehicle secures the agreement, lenders are often more comfortable approving applications from businesses that might otherwise struggle with a secured business loan requiring property as collateral.
Can you get asset finance with bad credit?
Yes, it's possible. Many UK asset finance providers focus more on the value and resalability of the asset, and your business's ability to generate income from it, than on a flawless credit history.
Since the lender can repossess and resell the asset if repayments stop, they're taking on less risk than with unsecured lending. This is why asset finance is often cited as one of the more realistic funding routes for businesses with:
- A low personal or business credit score
- Missed payments, defaults, or a County Court Judgment (CCJ) on file
- A limited trading history
- No property to offer as security
That said, approval isn't guaranteed. Lenders will still look at your overall financial position, including business bank statements, existing debt levels, and the strength of the asset you're financing.
How does asset finance work?
There are a few main types of asset finance, each suited to different needs:
Hire purchase
You pay a deposit, then fixed monthly instalments over an agreed term. Once you've made the final payment, you own the asset outright.
Finance lease
You rent the asset for an agreed period, spreading the cost through regular payments. You don't own the asset at the end, though some agreements allow you to sell it and keep a share of the proceeds.
Asset refinance
If you already own equipment, vehicles, or machinery outright, you can release cash tied up in them by using them as security for a new loan. This is a useful option if your business needs working capital but doesn't want to take on an unsecured business loan or bring in a guarantor.
💡 TIP
Think about whether you need to own the asset long-term (hire purchase) or simply need to use it for a set period (finance lease) as this will help narrow down the right agreement for your business.
What to consider before applying
Interest rates
Because bad credit is seen as higher risk, expect higher interest rates than a business with a strong credit history would be offered. Rates vary depending on the asset type, its age, and how quickly it depreciates.
Deposit requirements
Some lenders may ask for a larger deposit if your credit history is poor, to reduce their exposure.
Personal guarantee
Even though the asset itself is security, some lenders may still ask a director to sign a personal guarantee, particularly for weaker credit profiles or newer businesses.
Asset depreciation
Lenders will assess how well the asset holds its value. Equipment or vehicles that depreciate quickly or have a narrow resale market can be harder to finance, or may come with stricter terms.
💡 TIP
Before applying, check your business and personal credit reports for errors via agencies like Experian, Equifax, or Creditsafe, and be ready to explain any missed payments or CCJs on file.
Advantages of asset finance for bad credit
👍 More accessible than unsecured lending
Because the asset itself acts as security, lenders are often more willing to approve businesses with poor credit than they would be for unsecured borrowing, where there's nothing tangible to fall back on.
👍 Manageable, spread-out repayments
Rather than paying the full cost of equipment upfront, you spread the expense over fixed monthly instalments, helping to protect cash flow.
👍 Potential to own the asset outright
With a hire purchase agreement, you take ownership of the equipment once the final payment is made, turning the finance into a long-term business asset.
👍 Existing assets can unlock working capital
If you already own equipment, vehicles, or machinery outright, asset refinance lets you release cash tied up in them without needing to sell.
Disadvantages of asset finance for bad credit
👎 Higher interest rates
Because bad credit is seen as higher risk, expect to pay more in interest than a business with a strong credit history would be offered on the same type of agreement.
👎 Risk of repossession
Since the asset secures the agreement, the lender can repossess it if repayments are missed, so it's important to only commit to payments your business can comfortably sustain.
👎 Personal guarantees may still be required
Even though the asset provides security, some lenders may still ask a director to sign a personal guarantee, particularly for weaker credit profiles or newer businesses.
👎 Limited to asset-related funding needs
Asset finance is tied to a physical asset, so it isn't suitable if you need funding for something else entirely, such as covering a short-term cash flow gap.
Alternatives funding options
If asset finance isn't the right fit, there are other routes worth exploring:
- Merchant cash advances — a lump sum based on your future card sales, repaid as a percentage of daily takings.
- Invoice finance — borrow against unpaid invoices to free up cash tied up in customer payments
- Unsecured business loans — funding without needing to put up any specific asset as security.
- Guarantor business loan — a third party agrees to cover repayments if your business can't, which can improve approval chances.
Conclusion
Asset finance can be a practical way for UK businesses with bad credit to fund the equipment, machinery, or vehicles they need to operate and grow, without the equipment cost hitting cash flow all at once. Because the asset itself reduces the lender's risk, it's often more accessible than unsecured borrowing, though it typically comes with higher rates and the risk of repossession if repayments are missed. Comparing offers from multiple lenders, and weighing up alternatives like invoice finance or a guarantor loan, will help you find the most suitable option for your business.
Frequently asked questions
Can I get asset finance with a low credit score?
Yes. Because the asset itself acts as security, many lenders will consider applications from businesses with a low credit score, missed payments, or a CCJ, though terms may be stricter and rates higher.
Do I need a deposit for asset finance with bad credit?
Often, yes. Some lenders ask for a larger deposit when a business has a weaker credit profile, to help offset their risk.
What happens if I can't keep up with repayments?
Because the asset secures the agreement, the lender can repossess it if repayments are missed. It's important to only borrow what your cash flow can comfortably support.
Is asset refinance the same as asset finance?
Not quite. Asset finance is used to acquire a new asset, while asset refinance lets you release cash from equipment, vehicles, or machinery you already own outright.
What credit score do I need for asset finance?
There's no fixed minimum, as lenders weigh the asset's value and your business's overall financial position alongside your credit history. Businesses with poor credit can still be approved, though likely at a higher rate.
See if your business qualifies for asset finance
At BLFBC, we can help you access funding quickly, even if your credit isn’t perfect.
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