Guide
Using Vehicles and Equipment as Security for a Business Loan
Why vehicles and equipment work differently to property as security
Business equipment and commercial vehicles can secure a business loan the same way property can, but lenders treat them more cautiously because they depreciate, wear with use, and have a narrower, more specialist resale market than property. That generally means a lower loan-to-value ceiling and a shorter maximum term than you’d see against a comparable property valuation.
What counts as eligible equipment
- Commercial vehicles, including vans, HGVs and specialist fleet vehicles.
- Machinery, from manufacturing plant to catering or medical equipment, provided it has a genuine resale market.
- Other business equipment with a clear, independently assessable value.
Age, condition and how specialist the equipment is all affect what a lender will offer. General-purpose equipment with a broad secondary market (a standard commercial vehicle, for instance) is viewed more favourably than highly specialist machinery with few buyers if it needed to be resold.
Secured business loan vs equipment finance
It’s worth distinguishing this from equipment finance directly. A secured business loan lends against equipment or a vehicle you already own, and the funds can be used for any business purpose. Equipment finance instead funds the purchase of a specific new piece of equipment, with that asset itself acting as the security from the outset. If your funding need is a single new purchase, equipment finance is usually the more direct fit; if you want to release capital from equipment you already own, for working capital or any other business purpose, a secured business loan against it is the right structure.
How loan-to-value works against equipment
Because vehicles and equipment depreciate, lenders typically offer a lower loan-to-value than against property, sized against a current, independently assessed valuation rather than the original purchase price. The remaining useful life of the asset matters too: equipment nearing the end of its working life will attract a lower LTV and shorter term than newer equipment with years of resale value ahead of it.
How it works for growth-stage businesses
For a business investing in growth, securing finance against equipment already on the books is a way of releasing capital without a fresh capital investment or a new equipment loan. This works well when the difference between what you need (working capital, a new hire, marketing) and what equipment finance would actually fund (a specific new asset) matters: an equipment loan ties the money to the asset being financed, while a secured business loan against equipment you already own gives you cash to use freely. Take a look at both structures before deciding which one actually matches what the funding is for.
Interest, payments and term
Because the underlying asset depreciates over the term, expect a shorter maximum term and a somewhat higher rate than an equivalent property-secured loan, with monthly payments structured the same way, capital plus interest, over the agreed term. Model your own numbers on our secured business loan calculator before comparing offers.
Equipment finance options compared
There are really three finance options for a business that owns or needs equipment: a secured business loan against equipment you already own (releasing capital for any purpose), equipment finance for a new purchase (the equipment itself is the security from day one), and an unsecured business loan if you’d rather not use equipment as security at all, taking a higher rate in exchange. Which is right depends on whether you’re funding new equipment specifically or releasing capital from equipment already on your books, and how much you personally want a specific business asset tied to the loan.
Which businesses typically use this route
Equipment and vehicle security shows up across most industries that hold meaningful physical assets: hospitality businesses with kitchen and catering equipment, manufacturing and engineering businesses with plant and machinery, construction and trades businesses with vehicles and tools, and logistics businesses with commercial fleets. Any small or established business with owned, resaleable equipment can consider this route, not just these sectors specifically, but they’re where it comes up most often in practice.
Costs, accounts and what to prepare before you apply
Beyond the loan-to-value and rate already covered, expect an arrangement fee on top of the headline cost, and a valuation fee for the equipment itself. When you apply, most lenders will want to see your business accounts, proof of ownership for the equipment (invoices or purchase records showing you own it outright or know your exact equity position), and, as with most secured business finance, a personal guarantee from directors alongside the asset. Consider gathering these before you start, since it’s the single biggest thing that speeds up a decision.
Do you need security for a business loan at all?
Not necessarily. If you don’t have suitable vehicles, machinery or property to offer, an unsecured business loan removes the need for a named asset entirely, priced instead on your trading history and cash flow. Our guide to using property as security covers the other main asset type, and our secured vs unsecured comparison puts both routes side by side.