When it comes to funding large projects or buying big-ticket equipment, businesses often need to look beyond their own pockets.
That is where finance options like asset finance and project finance come into their own.
While both help get things moving for you, they do work in quite different ways — and it is really important to understand the difference so you can make informed decisions based on your specific needs.
Let’s take a proper look to help you know more about these types of funding options, then if you need help, our team is here to help you.
What Is Asset Finance?
Asset Finance is often used to support your business operations, and help firms avoid large upfront costs while keeping the business ticking along.
So, whether it is a small van you are after or you need a piece of industrial equipment, asset finance helps free up your working capital so you can focus more on growth.
Asset finance is also a type of traditional financing where you borrow money to purchase specific types of assets – like machinery, vehicles, or IT equipment.
The asset itself is then used as security for the loan.
Types of asset finance include here for instance:
Hire Purchase
This is where you buy the asset in instalments and own it at the end.Finance Lease
Here you rent the asset for most of its useful life.Operating Lease
With an operating lease, this is more like a short-term rental.Asset Refinance
Then with asset refinance, you can then release cash from assets you already own.
What Is Project Finance?
Now, project finance is a different beast altogether, as this is used for large-scale projects like a power plant, toll road, or other major infrastructure investments.
Here instead of your business taking on the debt, a separate project company — often a special purpose vehicle (SPV) — is created to manage the particular project.
The key idea?
The loan is paid back using the projected cash from that specific project, not from the wider business. It’s typically a mix of equity investors, project sponsors, and debt funding from financial institutions like banks.Examples of where project financing tends to be used includes:
- Infrastructure projects (bridges, railways, airports)
- Industrial projects (manufacturing plants, oil refineries)
- Natural resources (mines, gas pipelines)
- Energy sector (solar farms, hydroelectric plants)
Find out if Asset Finance is right for you
At Business Finance, we make asset finance simple and stress-free. No more worrying about finding the right ideal — we do all the hard work for you. Our team is here to secure the best finance option that suits your business needs.
Want to know how much you could borrow and what your monthly repayments might be?
No problem, Get in touch with our friendly team today, and we’ll be happy to help.
Asset Finance vs Project Finance: The Key Differences
| Feature | Asset Finance | Project Finance |
|---|---|---|
| Main Use | Buying or leasing specific assets | Funding large-scale infrastructure or industrial projects |
| Structure | Loan backed by the asset | Financing through a Special Purpose Vehicle (SPV) |
| Repayment | From overall business income | From project’s cash flow |
| Risk Allocation | Stays with the business | Shared among parties (limited recourse) |
| On/Off Balance Sheet | Usually on balance sheet | Often off-balance sheet |
| Loan Security | Type of asset financed | Future cash flows of the project |
| Financial Modelling | Simple cash flow analysis | Detailed Project Finance Model required |
| Typical Users | SMEs, retailers, service providers | Governments, developers, large corporations |
| Conditions Precedent | Fewer and simpler | Many, including regulatory and environmental approvals |
| Loan Life | Short to medium term | Long term (10–30 years) |
| Capital Structure | Straightforward (loan + equity) | Complex mix of equity, debt, and mezzanine finance |
Why Does This Matter for Your Business?
The choice between asset financing and project financing really comes down to the type of project, the level of risk, and how predictable your cash flows are.
When is Asset Finance and Project Finance a Good Fit?
| Category | Asset Finance | Project Finance |
|---|---|---|
| Use if you: |
|
|
| Pros |
|
|
| Cons |
|
|
The Role of Financial Institutions & Credit Brokers
In project financing, financial institutions play a huge role. For example, they will tend to help you improve your Project Finance Model and to check whether the loan will be repaid by the future cash flows of the specific project.
Meanwhile, credit brokers can help to provide the initial funding and take on more of the early risk for example.
Making the Right Choice
As you can see there really is no one-size-fits-all solution.
That’s why it’s important to think carefully about the financing structure that best suits your business or project, by asking yourself for instance:
Are you funding a large project or simply buying product details like equipment?
How steady are your projected cash flows?
Do you need to keep borrowing capacity available for the future?
Are you happy taking on the risk yourself, or do you want to share it?
If you are still unsure, having a chat with one of our finance experts who understands your practice areas, business model, and industry can really help you here as well.
Asset Finance vs Project Financing – A Guide on How They Differ Overall
As you can see, choosing between asset finance vs project finance is a bit like picking the right tool for the job.
One will help you grow your business bit by bit, the other helps you bring a big idea to life.
As a result, both can be robust financing solutions for you, but it all depends on your business goals, your resources, and your risk appetite.
At the end of the day, you want, flexible financing options, along with a structure that matches your cash flows of the project as well.
So if this is of interest to you, please get in touch with our team today to see how we can help you. Our finance team is here to help.
Find out if Asset Finance is right for you
At Business Finance, we make asset finance simple and stress-free. No more worrying about finding the right ideal — we do all the hard work for you. Our team is here to secure the best finance option that suits your business needs.
If you liked this Comprehensive Guide to Asset Finance in the UK, and you now want to know how much you could borrow and what your monthly repayments might be?
No problem, get in touch with our friendly team today, and we’ll be happy to help.
Meet the Team Behind Business Finance
Trusted Asset Finance Lenders at Your Fingertips
We work closely with some of the UK’s top asset finance lenders, making sure you’ve got the right options for your budget and goals.
Some of our finance lenders include, for instance:
