Soft asset finance: funding software, IT systems and fit-outs

Soft asset finance is funding for business assets that have little or no resale value once installed or used: software, IT hardware, telephone systems, EPOS, furniture, signage and office or shop fit-outs. It is for established businesses investing in systems and premises rather than machines, such as a practice rolling out new management software, a retailer replacing tills or an office moving to a new floor. Smart Funding Solutions knows which lenders on its panel are comfortable funding assets they cannot easily repossess and resell.

The term is also sometimes used for borrowing secured against intangible assets such as patents and trademarks, which is covered further down. For finance on vehicles, plant and machinery, see our main asset finance hub.

01What counts as a soft asset?

Lenders divide equipment into hard assets, such as vehicles, plant and machinery, which hold value and can be resold, and soft assets, which cannot easily be recovered and sold if a borrower defaults. Common soft assets include:

• Software licences, implementation and data migration.
• Computers, servers and networking equipment.
• Telephone and communications systems.
• EPOS and payment systems.
• Furniture, shelving and signage.
• Office, shop, restaurant and warehouse fit-outs.
• Security and CCTV systems.

02How soft asset finance works

A lender pays the supplier and you repay in fixed instalments over an agreed term, through one of two main routes:

• Leasing: you pay to use the assets for the term, with options at the end to continue, upgrade or return them. This suits technology that dates quickly.
• Hire purchase: you pay instalments and own the assets once the final payment is made. This suits systems and fit-outs you will keep long term.

03Security and personal guarantees

Soft asset finance is secured on the assets themselves, through the lender owning them under a lease or keeping title under hire purchase, but because software and fit-outs are hard to recover, most lenders also look for a personal guarantee from the directors, a deposit, or both, particularly for younger companies.

Because soft assets have limited resale value, the lender relies more on the strength of your business than on the equipment. That typically means shorter terms than for hard assets, closer scrutiny of your accounts and credit history, and sometimes a deposit or personal guarantee.

04Financing software

Lenders most readily fund software with a clear, one-off cost, such as an ERP, CRM, accounting or practice management system. A single agreement can often cover:

• Perpetual or multi-year licences.
• Implementation, configuration and data migration.
• Staff training linked to the rollout.
• Servers, computers and tablets bought alongside the software.

Monthly cloud subscriptions (SaaS) are normally paid as a running cost and are rarely financed, although some lenders will fund an upfront multi-year subscription if the supplier offers a discount for paying in advance. Before you sign, check what happens to support, updates and your licence if the supplier changes its product or goes out of business, because your repayments continue regardless. Some software vendors offer their own payment plans; compare them with independent finance on total cost and flexibility.

Because soft assets have limited resale value, the lender relies more on the strength of your business than on the equipment.

05Financing fit-outs

Partitioning, lighting, flooring, furniture and shopfitting are among the hardest assets to recover, so lenders look closely at your trading record and, for rented premises, the length of your lease. Our guide to fit out finance covers office, warehouse and shop projects in detail.

06Who qualifies for soft asset finance?

Soft asset finance usually suits limited companies, LLPs and partnerships with at least two years of trading and filed accounts, clean credit and comfortable affordability; newer businesses can qualify but often need a deposit, a guarantee or a shorter term. Lenders look at:

• Time trading, filed accounts and bank statements.
• Business and director credit history.
• Affordability of repayments.
• A detailed supplier quote setting out licences, services, hardware and installation.
• The supplier's standing and how essential the assets are to the business.

07How long does soft asset finance take?

A straightforward lease or hire purchase for IT hardware, EPOS or a phone system typically takes from a few days to two weeks once a lender has the supplier's quote, your latest accounts and bank statements. Larger software and fit-out projects usually take longer, often two to four weeks, because the lender reviews a bigger proposal more closely and may want to see the project plan, the lease on rented premises or a breakdown of how much of the cost is labour. Staged payments add a further step, as the lender releases funds to the supplier at agreed milestones or on signed completion. Vague quotes, newer businesses and recent credit issues are the usual causes of delay.

08Benefits and drawbacks

Benefits	Drawbacks
Avoids a large upfront outlay	Total cost is higher than paying cash
Fixed repayments make budgeting simpler	Lenders are more selective than for hard assets, especially with newer businesses
Leasing makes it easier to refresh IT and software	Payments continue even if the system stops being useful
Hardware, software, installation and training can be bundled	A personal guarantee may be required

09Borrowing against intellectual property

Some businesses use "soft asset finance" to mean lending secured on intangible assets such as patents, trademarks, copyrights and software code. This is a specialist, relatively small market. Lenders value the intellectual property using market, income or cost-based methods and carry out legal due diligence to confirm you own it outright and that it is properly protected.

IP-backed lending can suit established companies whose value sits mainly in their technology, brands or content. The risks are real: valuations can move with technology and markets, ownership or validity challenges can complicate the deal, and repayments are due regardless of how the IP performs. Take specialist legal and valuation advice first, and see the Intellectual Property Office for registering and protecting IP. Software companies raising money for their own growth have different options, covered on our software company funding page.

10Alternatives

• Unsecured business loans can fund software, IT or a fit-out without tying the finance to specific assets.
• Supplier or vendor payment plans, which some software and IT providers offer directly.

11How we help