Asset finance brokers: when to use one and what it costs

An asset finance broker matches the asset you want to fund with lenders likely to finance it, prepares the proposal and handles the paperwork through to payout. The broker does not lend. Asset finance covers hire purchase, finance leases, refinance of assets you own and, for some brokers, vehicle contract hire.

• Finding the right lender. Lenders specialise: some in vehicles and plant, some in soft assets such as IT or fitness kit, some in used or unusual equipment.
• Getting asset finance quotes. Presenting one proposal to several lenders on the broker's panel, so you can compare.
• Packaging the deal. Supplier invoice, asset details, accounts and bank statements, in the form each lender wants.
• Explaining the terms. Deposit, balloon, term, end-of-term options and any fees.

Our asset finance guide explains the products themselves. This page is about whether to use a broker to get them.

Most asset finance brokers are paid commission by the lender when the deal pays out. Some also charge you a documentation or arrangement fee, and a few work on a fee only. Commission is often built into the rate you pay, so the same asset can cost more through one broker than another.

FCA rules set what a credit broker must tell you:

• That it is a broker. CONC 3.7.7R requires a credit broker's promotions to state prominently that it is a credit broker and not a lender, and CONC 3.7.3R requires it to say whether it works exclusively with one or more lenders or as an independent broker.
• Its commission. Before a credit agreement, CONC 4.5.3R requires a credit broker to disclose the existence and nature of commission where it could affect its impartiality or your decision, and to explain how it may affect what you pay.
• Any fee to you. CONC 4.4.3R says a credit broker must send you a notice setting out any charge and get your confirmation before taking it.
• No discretionary commission on motor finance. Since 28 January 2021, CONC 4.5.6R has banned discretionary commission arrangements, where the broker's commission depends on the interest rate it sets, on regulated agreements financing a motor vehicle.

Those rules come from consumer credit regulation, which mainly protects individuals. Under article 60C of the Regulated Activities Order, credit above £25,000 for business purposes is an exempt agreement, although introducing a sole trader or partnership to it is still regulated credit broking. Lending to a limited company is generally outside consumer credit regulation, broker rules included. A limited company financing a £60,000 machine should therefore ask for the broker's fees and commission in writing, because the rules may not require it.

Several lenders do not accept direct applications for asset finance at all. For these, a broker or introducer is the only route. The table comes from their profiles in our lender directory, in alphabetical order, and is not a ranking.

• Armada Asset Finance says financing is available only through its broker network, from £2,000 to £250,000, with a focus on soft assets.
• Haydock Finance works through brokers, introducers and vendors, and gives its decision to the introducer.
• InterBay Asset Finance takes applications through brokers on its panel, from £25,000 with no stated maximum.
• United Trust Bank says new asset finance applications are accepted only through approved asset finance brokers.

When a broker says it has a panel, ask which of these kinds of lender are on it and whether it is approved to introduce to them.

Going direct is often simpler for a standard asset when you already know which lender suits you. Three cases stand out:

• Your own bank. If you bank with a lender that offers asset finance, it already knows your account. Lloyds Bank, for example, publishes business hire purchase from £15,000 after a minimum 10% deposit.
• Dealer or manufacturer finance. Many dealers offer finance at the point of sale through a lender's vendor programme. It is convenient, and sometimes subsidised by the manufacturer, but you see only that lender's offer.
• A lender that takes direct enquiries. Some lenders deal with both businesses and brokers.

Allica Bank says businesses can enquire through its contact form or by phone, or via an introducer. Renaissance Asset Finance discusses the asset with the customer or their broker, and Simply Asset Finance accepts proposals from a broker, a dealer or the business. Lloyds Bank says new and existing customers can apply, and that you do not need to bank with it.

A broker is also useful when you want an asset finance quote from more than one lender without making several full applications. Our guide to hire purchase vs leasing helps you decide which product to ask for.

1. Are you authorised by the FCA, and for which activities?
2. Which lenders are on your panel for this type of asset?
3. How are you paid on this deal, and does commission differ between lenders?
4. Will I pay you any fee, and when?
5. What is the total amount payable, including deposit, balloon and fees?
6. Will each lender run a soft or hard search, and when?

Our guide to business finance advisers covers the same questions for brokers in general, and our page on equipment finance explains how lenders assess the asset.

Get the supplier's quote and the asset details first, then decide whether to go direct or use a broker. You can check your funding options with Capzy using a soft search that does not affect your credit score. A lender's full application may involve a hard search, and all finance is subject to status and lender criteria. More lender guides are in our lenders category.