The amount secured by UK businesses through leasing has jumped 12% in the last year*, to its highest level in seven years.
Businesses used £29.1bn of leasing in 2015, up from £26bn in the previous year and just below the £30.8bn secured in 2008.
Peter Alderson, Managing Director LDF, explains: “Businesses have seen their orders rapidly expand and are now acquiring additional finance to meet the demand and to expand their capacity further.”
“Leasing is now firmly established as a crucial route for many SMEs looking to secure the required finance.”
"The Bank of England’s rBuecent Credit Conditions Survey suggests that lending to fund Merger & Acquisition deals is crowding out lending to SMEs, which may explain why SMEs are turning to leasing companies rather than banks for finance.”
Asset finance enables a business to borrow the cost of a capital investment upfront, and spread the repayments across fixed monthly payments, helping to clarify budgets. It can be used to fund a range of investments, including updating IT systems, office refurbishments and the purchase of assets such as commercial vehicles.
As Peter explains: “As the amount of borrowing through asset finance approaches 2008 levels, many are optimistic in looking to make the investments that may have been previously delayed.”
“Leasing allows businesses to invest in infrastructure without impacting cash flow or adding to debt. It allows businesses to focus resource on what they do best – growing their businesses.”
Advantages of leasing include:
- Leasing does not impact on a business’ other credit lines, therefore, a business has more scope to seek additional finance in the future
- Allows a company to upgrade their equipment when it becomes obsolete
- Has much quicker turnaround times than other forms of lending, allowing businesses to move forward with expansion immediately
- Businesses can easily control their cash flow as leasing involves regular fixed costs.
Sources:
* Finance & Leasing Association statistics, yearend December 31st.
** Estimated figure for November 2013.
