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How asset finance companies can help SMEs to recover from COVID-19

There has arguably never been so much support for SME businesses than during the COVID-19 pandemic.

In the UK, the Coronavirus Business Interruption Loan Scheme and the newly introduced Bounce Back Loan Scheme are now thought to have provided over £10 billion worth of loans to the UK’s small businesses.

The Bounce Back Loan Scheme has had a tremendous impact, with more than £5 billion of funding approved in its first three days.

Under the CBIL Scheme, banks are having to guarantee 20% of the value of the loan and the business owner has to personally guarantee the loan if it is more than £250,000, meaning it has been less popular than the Bounce Back Loan, which is 100% government backed and quicker to provide.

With some investors’ sentiment levels falling to levels last seen during the 2008 financial crisis, asset finance opportunities may also offer crucial lifelines for small and medium-sized businesses.

For many small businesses, the major benefit of asset finance over a loan is the fact that business owners do not have to put up any of their other business or personal assets as security because the provider is not loaning any money – they are providing the asset itself, on a hire or lease basis.

As the finance provider legally owns the asset, at least until the SME has repaid the full value, that payment serves as the security.

Because asset financiers cannot decide to recall the loan at any point, as no money has been loaned, the business has greater security throughout the lifetime of the agreed term. This means that, unlike other loans or schemes, businesses can accurately plan their financial future on a more clear and stable footing.

As well as the securities that asset finance arrangements give, they can also be very flexible.

For SMEs, there is often a lot of scope to negotiate payment options. During the COVID-19 crisis, this has been invaluable for many businesses, particularly for those in the hospitality sector.

Asset financiers can support these businesses by helping their business leaders to gain access to vital infrastructure.

Asset financing is an exceptionally valuable tool, which many SMEs should look towards; especially as they rebuild their businesses over the coming decade.

To help them, finance providers need to explain the clear benefits to their potential clients in terms of how these agreements can help their cashflow and support revenue growth – something which many SMEs will be yearning for right now.

Written by Reece Tomlinson

Source: Asset Finance International

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Asset finance market reaches record level in UK during 2019

The UK asset finance market reached record levels last year as demand grew 6%, according to the Finance & Leasing Association (FLA).

Latest FLA figures show that total asset finance new business (primarily leasing and hire purchase) reached a record level of £35.7 billion.

In the final month of the year, business only grew by 1% compared to December 2018, but the record was secured by strong performances earlier in the year.

During December 2019, the IT equipment finance sector continued to report double-digit growth as new business increased by 10% compared with the same month in 2018.

By contrast, the commercial vehicle finance and plant and machinery finance sectors reported falls in new business of 2% and 22% respectively, over the same period, potentially reflecting uncertainty as companies waited for the results of a general election and future clarity on Brexit.

In 2019 as a whole, the commercial vehicle finance and plant and machinery finance sectors reported the strongest growth rates, with new business up by 9% and 5% respectively, compared with 2018.

Geraldine Kilkelly, head of research and chief economist at the FLA, said: “The asset finance industry reached a record level of new business in 2019, despite continued weakness in business investment. Within the overall total, more than £20 billion went to SMEs to fund investment in machinery and equipment, 4% higher than in 2018.

“Key industry sectors benefitted from using asset finance last year, with double-digit growth in new finance provided for construction and manufacturing equipment.”

UK Asset Finance Market 2019

Dec 2019 % change on

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Total FLA asset finance (£m) 2,943  8,679  35,653 
Total excluding high value (£m) 2,605 0 7,970 0 33,008 5
By asset:
Plant and machinery finance (£m) 530 -22 1,677 -9 7,320 5
Commercial vehicle finance (£m) 693 -2 2,186 -7 9,136 9
IT equipment finance (£m) 376 10 840 25 2,830 3
Business equipment finance (£m) 231 2 603 -9 2,465 -2
Car finance (£m) 754 8 2,382 4 9,998 4
Aircraft, ships and rolling stock finance (£m) 35 17 116 -5 566 88
By channel:
Direct finance (£m) 1,279 -5 3,987 -1 16,680 5
Broker-introduced finance (£m) 522 1 1,689 1 6,782 9
Sales finance (£m) 804 7 2,294 1 9,546 2
By product:
Finance leasing (£m) 339 -15 1,088 -8 4,378 3
Operating leasing (£m) 640 7 1,815 1 6,984 1
Lease/Hire purchase (£m) 1,458 -5 4,476 -4 19,305 6
Other finance (£m) 336 35 930 44 3,587 18

Source: FLA

Written by John Maslen

Source: Asset Finance International

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UK asset finance market posts strong Q3 results as businesses stockpile in anticipation of Brexit

Asset finance new business (primarily leasing and hire purchase) grew 5% during Q3 2019 compared to the same period last year, according to figures from the Finance & Leasing Association (FLA).

The association also reported 5% year-on-year growth during September.

The strongest September growth came from finance for plant and machinery and business cars, while aircraft, ships and rolling stock finance leapt 78%, but from a relatively low base.

In contrast, commercial vehicles remained flat during the month, although demand was up 8% for the quarter and 14% over the preceding 12 months.

IT equipment finance fell 10% and business equipment finance was down 1% during the month compared to the same period in 2018.

Geraldine Kilkelly, head of research and chief economist at the FLA, said: “In September, the asset finance industry reported its strongest growth in new finance for plant and machinery since January 2019 as businesses stockpiled ahead of another Brexit deadline.

“The industry has seen total new business grow in all but one month so far in 2019, with the latest annual new business total reaching a record level of £34.5 billion.”

Lease/hire purchase remains the dominant form of finance, accounting for 57% of the market in September and reporting year-on-year growth of 4%.

Sep 2019 % change on

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Total FLA asset finance (£m); 2,907 +5 8,454 +5 34,474 +7
Total excluding high value (£m) 2,688 +5 7,862 +5 31,959 +5
By asset:
Plant and machinery finance (£m) 623 +15 1,850 +9 7,445 +12
Commercial vehicle finance (£m) 730 0 2,148 +8 9,098 +14
IT equipment finance (£m) 309 -10 757 -8 2,663 -6
Business equipment finance (£m) 180 -1 1,584 -4 2,597 +5
Car finance (£m) 712 +4 2,160 +4 8,965 0
Aircraft, ships and rolling stock finance (£m) 20 +78 87 +71 541 +126
By channel:
 Direct finance (£m) 1,217 -1 3,859 +4 16,062 +6
 Broker-introduced finance (£m) 541 +4 1,623 +5 6,616 +12
Sales finance (£m) 930 +15 2,380 +6 9,281 +1
By product:
Finance leasing (£m) 405 -8 1,064 +2 4,256 +7
Operating leasing (£m) 501 +1 1,473 0 6,103 -1
Lease/Hire purchase (£m) 1,566 +4 4,718 +8 19,497 +10
Other finance (£m) 280 +20 877 +5 3,313 +8

Written by John Maslen

Source: Asset Finance International

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Commercial vehicle finance underpins UK asset finance market growth

Commercial vehicle finance was one of the only growth markets during August for UK asset finance new business (primarily leasing and hire purchase), according to new figures from the Finance & Leasing Association.

Finance for commercial vehicles was up 11% year-on-year in August and it has risen 14% over the past 12 months.

Other sectors were less buoyant, with plant and machinery up 1% during August compared to the same month last year, while business equipment finance and car finance were down 1%. Aircraft, ships and rolling stock finance nearly doubled, but it only makes up a small proportion of the asset finance market.

Geraldine Kilkelly, head of research and chief economist at the FLA, said: “August saw further double-digit growth in new finance provided for commercial vehicles as businesses were keen to invest in the newest technology.

“The strong performance of the industry so far this year meant it funded over 41% of investment in machinery, equipment and purchased software in Q2 2019, an 11-year high.”

Responding to the results, Chirag Shah, chief executive officer, Nucleus Commercial Finance, said: “We’re seeing more and more SMEs turn to asset-based finance to support their business ambitions, whether that be to restructure, deliver further growth or to enhance their cash flow.

“Despite the growth in the market, a major knowledge gap still exists when it comes to SME funding, particularly how asset-based lending solutions can be used to help businesses achieve their goals by leveraging assets such as property, stock and machinery. There is a big opportunity for the market to continue growing and it’s therefore our responsibility as an industry to educate SMEs on all the options available and to demonstrate the positive impact alternative finance can have on a business.”

August 2019 % change on

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Total FLA asset finance (£m) 2,452 0 8,778 +5 34,311 +6
Total excluding high value (£m) 2,321 +1 7,946 +2 31,820 +5
By asset:
Plant and machinery finance (£m) 585 +1 1,842 +5 7,343 +11
Commercial vehicle finance (£m) 667 +11 2,256 +11 9,110 +14
IT equipment finance (£m) 166 -16 704 -15 2,692 0
Business equipment finance (£m) 211 -1 1,626 -4 2,622 +4
Car finance (£m) 572 -1 2,269 +2 8,935 -2
Aircraft, ships and rolling stock finance (£m) 19 +95 173 +126 533 +115
By channel:
Direct finance (£m) 1,160 0 4,042 +4 16,086 +6
Broker-introduced finance (£m) 513 +6 1,627 +5 6,574 +12
Sales finance (£m) 648 0 2,276 -3 9,160 -2
By product:
Finance leasing (£m) 310 +4 987 +2 4,321 +11
Operating leasing (£m) 430 -2 1,478 -2 6,098 -4
Lease/Hire purchase (£m) 1,373 +3 4,927 +7 19,408 +10
Other finance (£m) 270 +13 954 +3 3,252 +6

Source: FLA

Written by John Maslen

Source: Asset Finance International

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UK asset finance market grows by 11% in first quarter of 2019

Asset finance new business (primarily leasing and hire purchase) grew by 11% during Q1 2019 compared to the same period last year, according to new figures released today by the Finance & Leasing Association (FLA).

New finance for manufacturing and construction equipment increased by 25% and 26% respectively, compared to Q1 2018.

The growth followed a strong market in March, which grew by 11% year-on-year, with including particularly high growth in commercial vehicle finance and IT equipment finance sectors.

All channels delivered growth during the quarter, although the strongest performance came from broker-introduced finance, which rose 19% year-on-year.

During March, broker-introduced finance accounted for 19% of sales, up from 18% for the same period last year, while direct finance took 50%, down from 51%, and sales finance 30%, down from 31%.

Geraldine Kilkelly, head of research and chief economist at the FLA, said: “The asset finance market reported a record level of monthly new business in March and the strongest quarterly growth in Q1 2019 since Q3 2016.
“Asset finance continued to support key sectors of the economy in the first quarter.”

March 2019 % change on

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Total FLA asset finance (£m) 3,679 +11 8,490 +11 33,447 +7
Total excluding high value (£m) 3,403 +7 7,861 +9 31,069 +5
By asset:
Plant and machinery finance (£m) 728 +11 1,861 +12 7,055 +8
Commercial vehicle finance (£m) 994 +17 2,231 +23 8,402 +14
IT equipment finance (£m) 211 +5 612 +18 2,808 +19
Business equipment finance (£m) 252 -1 623 +2 2,670 +5
Car finance (£m) 993 -3 2,209 +2 8,940 -3
Aircraft, ships and rolling stock finance (£m) 111 +238 147 +122 392 -12
By channel:
Direct finance (£m) 1,711 +5 3,926 +7 15,492 +4
Broker-introduced finance (£m) 658 +19 1,642 +19 6,354 +16
Sales finance (£m) 1,033 +3 2,293 +5 9,223 +1
By product:
Finance leasing (£m) 429 +6 1,040 +14 4,220 +11
Operating leasing (£m) 645 -10 1,447 -6 5,894 -9
 Lease/Hire purchase (£m) 2,006 +9 4,756 +15 18,769 +11
Other finance (£m) 439 +53 963 +24 3,240 +7

Written by John Maslen

Source: Asset Finance International

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UK asset finance market reaches record level in 2018

The UK asset finance market reached a record level during 2018 with new business totalling almost £33 billion.

The rise of 3% compared to 2017 represents the eighth consecutive year of growth for the industry, according to the Finance and Leasing Association, and comes despite the disruption of ongoing Brexit negotiations.

Asset finance new business (primarily leasing and hire purchase) grew in December by 7% compared with the same month in 2017, and by 5% during Q4 2018 as a whole.

The plant and machinery finance and commercial vehicle finance sectors reported new business up in December by 29% and 18% respectively, compared with 2017, while new finance for IT equipment was up by 16% over the same period.

Direct finance was the main form of funding approved during the year, accounting for £15.3 billion, a rise of 2% year-on-year, while sales finance was down 1% to £9.1 billion. Broker-introduced finance grew strongly, rising 12% year-on-year to £6 billion.

Lease/hire purchase remains the most popular form of funding, accounting for more than £18 billion of finance last year, a rise of 8% compared to 2017.

Geraldine Kilkelly, head of research and chief economist at the FLA, said: “The temporary increase in the Annual Investment Allowance for plant and machinery from January 1, 2019 announced in the last Budget should support further growth in this sector over the next few months.”

During 2018, FLA members provided a total of £137 billion of new finance to UK businesses and households. FLA members financed around third of UK investment in machinery, equipment and purchased software in the UK in 2018.

UK asset finance market 2018

Dec 18 % change on

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Total FLA asset finance (£m)  2,788 +7 8,236 +5 32,571 +3
Total excluding high value (£m) 2,501 +8 7,656 +4 30,472 +3
By asset:
Plant and machinery finance (£m) 660 +29 1,786 +18 6,849 +5
Commercial vehicle finance (£m) 673 +18 2,218 +14 7,984 +7
IT equipment finance (£m) 342 +16 674 -9 2,714 +15
Business equipment finance (£m) 247 +11 735 +16 2,659 +4
Car finance (£m) 617 +3 2,040 -7 8,893 -5
Aircraft, ships and rolling stock finance (£m) 30 -17 123 +105 312 -43
By channel:
Direct finance (£m) 1,268 +13 3,833 +5 15,259 +2
Broker-introduced finance (£m) 502 +8 1,629 +12 6,090 +12
Sales finance (£m) 731 -1 2,195 -5 9,123 -1
By product:
Finance leasing (£m) 381 -4 1,134 +11 4,094 +8
Operating leasing (£m) 511 0 1,531 -6 5,981 -11
Lease/Hire purchase (£m) 1,532 +28 4,658 +13 18,158 +8
Other finance (£m) 249 -3 637 -5 3,052 -3

Source: Asset Finance International

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Brokers overcome uncertain economy to guide UK asset finance market towards record levels

Asset finance new business (primarily leasing and hire purchase) grew by 9% in October, compared with the same month last year, pushing the market closer to an all-time record, according to new analysis.

Latest figures from the Finance & Leasing Association (FLA) show that the plant and machinery finance and business equipment finance sectors had particularly strong new business growth, rising 16% and 29% respectively, compared with October 2017.

New finance for commercial vehicles increased by 23% over the same period.

For the 12 months to the end of October, asset finance demand has grown 9% compared to the previous 12 month period, or 3% excluding high-value items.

Growth has come almost entirely from broker-introduced finance, which was up 22% in October compared to the same period last year and 12% over the past 12 months.

Geraldine Kilkelly, head of research and chief economist at the FLA, said: “The asset finance market made a strong start to the final quarter of 2018, with new finance for construction and agricultural equipment up in October by 27% and 19% respectively, compared with the same month in 2017.

“Asset finance new business in 2018 as a whole is likely to reach a record level, despite continued economic uncertainty weighing on business investment.”

Source: Asset Finance International

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UK asset finance market breaks records

Asset finance new business reached record levels in 2017 following growth of 5% during the year, according to the latest figures from the UK’s Finance & Leasing Association (FLA).

The sector achieved its seventh consecutive year of growth, with new business levels reaching almost £32 billion last year.

The plant and machinery finance and commercial vehicle finance sectors reported new business up in 2017 by 12% and 1% respectively, compared with 2016, while new finance for business equipment was up by 7% over the same period.

Geraldine Kilkelly, head of research and chief economist at the FLA, said: “The asset finance industry reported a record level of new business of almost £32 billion in 2017, despite challenging economic conditions and subdued business investment growth.

“The latest figures also reveal that asset finance is a vital source of funding for SMEs when investing in business equipment and machinery. Of the total asset finance new business in 2017, £18.6 billion went to SMEs – 12% higher than in 2016.”

During 2017, FLA members provided £128 billion of new finance to UK businesses and households, with £32 billion of finance provided to businesses and the public sector.

FLA members financed more than one-third of UK investment in machinery, equipment and purchased software in the UK last year.

UK asset finance market 2017

Dec17 % change on

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Total FLA asset finance (£m) 2,632 +4 +4 7,861 31,769 +5
Total excluding high value (£m) 2,483 -1  -1 7,695 30,752 +6
By asset:
Plant and machinery finance (£m) 512 +1 1,515 +5 6,617 +12
Commercial vehicle finance (£m) 572 -14 1,934 -1 7,480 +1
IT equipment finance (£m) 293 +19 726 +14 2,285 +2
Business equipment finance (£m) 227 +6 624 +6 2,581 +7
Car finance (£m) 629 -2 243 +4 9,531 +5
Aircraft, ships and rolling stock finance (£m) 36 -41 60 -50 549 +20
By channel:
Direct finance (£m) 1,153  -7  3,746  0  15,477  +4
Broker-introduced finance (£m) 579 +24 1,620 +21 5,839  +14
Sales finance (£m) 752 -8 2,329 +4 9,436 +7
By product:
Finance leasing (£m) 403 +1 1,022 +5 3,809 +6
Operating leasing (£m) 511  -12 1,624 -4 6,755  0
Lease/Hire purchase (£m) 1,225 +1 4,162 +5 16,924 +8
Other finance (£m) 1,053 +19 1,053 +19 4,281 +5

Source: Asset Finance International

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UK asset finance new business holds steady

The UK asset finance market has maintained a full-year growth rate of 4% as latest figures show the market held steady during November 2017.

New figures released today by the Finance & Leasing Association (FLA) show that asset finance new business (primarily leasing and hire purchase) in November was £2.5 billion, a similar level to the same month in 2016.

The commercial vehicle finance and IT equipment finance sectors reported new business up by 5% and 1% respectively, compared with the same month in 2016, while new finance for plant and machinery fell by 3% over the same period.

Geraldine Kilkelly, Head of Research and Chief Economist at the FLA, said: “The asset finance market reported a broadly stable picture across the main asset sectors in November, and remains on course to report a record level of annual new business in 2017 of around £32 billion.”

Total FLA asset finance growth to the end of November is 4%, but excluding high value items, it is 6%.

Nov 17 % change on

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Total FLA asset finance (£m)  2,541  0 7,962  0  31,804  +4
Total excluding high value (£m)  +4  7,936  +3  30,919 +6
Data Extracts:
By asset:
Plant and machinery finance (£m)  481  -3  1,464  -2  6,506  +10
Commercial vehicle finance (£m)  691  +5  2,061  +4  7,574  +2
IT equipment finance (£m)  235  +1  642  +5  2,246  -4
Business equipment finance (£m)  209  -4  624  +4  2,566  +9
Car finance (£m)  738  -2  2,538  -1  9,854 +5
Aircraft, ships and rolling stock finance (£m)  8  -60  45  -45  574  +18