Product-as-a-service (PaaS) circular business models are at a disadvantage in terms of bank financing compared to many linear business models. Such business models generally face significant challenges both in the case of collateral-based and business case-based credit security assessments. The challenges are due to both difficulties in assessing and realising the residual value of the collateral and due to the timeframe of the risk assessment of the business case. Furthermore, the complex services that are the source of competitive advantage for PaaS firms often disqualify customer contracts as collateral. Two of the challenges (low inventory valuation and forced depreciation losses) are traced to accounting and credit regulations. Another five challenges are traced to long-term industry practice. The empirical evidence consists of quotes and summarised data from 38 interviews and 24 survey responses with banks and product firms exploring circular economy financing.