Persuading SMEs to make asset finance their first source of funding
Recent data released by the Office for National Statistics shows that despite the UK economy showing little sign of recovery, in 2012 total business investment grew by a healthy 4.8%. Encouraging signs indeed with business growing virtually across the board: plant and machinery, automotive, commercial vehicles, business and IT equipment and there is no reason to suggest that 2013 shouldn’t be equally good.
To add to a general sense of positivity, just a matter of weeks ago the Finance and Leasing Association (FLA) released figures showing double-digit growth in asset finance and quoting £1.4 billion of finance taken up by UK companies for IT assets alone.
While the Government’s figures combined with the FLA’s glowing endorsement may well have instilled a sense of optimism, it appears that there is still some way to go in getting small and medium sized businesses the finance they need to fund their business investment.
Asset finance v mainstream banks as a source of funding
Part of the problem has emerged with the findings from the Department of Business Innovation & Skills Small Business Survey (SBS). Between June and September 2012, they polled nearly 6,000 SME employers to find out where they looked for external finance. Nearly a quarter of all SMEs went looking for finance in 2012, with 48% of them going straight to their banks and just eight percent applying for asset finance.
Even though 47% of companies were aware of the existence of asset finance as a source of funding, they still opted to approach their banks, a figure that rose to 75% of medium-sized businesses. Yet big business has been enjoying the many benefits of asset finance for years. It was also interesting to note that those that had sought asset finance and leasing had fewer difficulties in getting finance from the first source approached.
So why isn’t asset finance more popular with smaller businesses, particularly given the banks apparent reluctance to lend?
Don’t fix the blame, fix the problem
It’s all too easy to point the finger at the less-than-reputable companies who use underhand tactics such as ‘exaggerating’ residual values in order to lower the monthly charge, poor communication, punitive extension charges, and complex, unclear returns procedures.
There’s little doubt a few unprofessional leasing companies have sullied the reputation for everyone else. But the fact is that this is an industry problem that requires us to look at the whole picture. We need to deliver the level of service that ensures that businesses actively consider asset finance not just as an alternative to the banks, but a better, more flexible and more customer focused alternative.
Putting the trust back into asset finance
So what would persuade smaller businesses to use asset finance as a source of funding?
To start with leasing companies need to start focusing on the customers and not the assets, only this way can we build two-way, long-term relationships based on trust. This collaboration also ensures that we fully understand the client’s business; enabling us to deliver the best funding method and source according to their needs while also gathering important intelligence about our customers’ business.
The final and arguably most importantly part is transparency and must be provided throughout the throughout the whole asset lifecycle. Clients should ultimately be provided with crystal-clear information supported by highly experienced professionals with extensive knowledge of the financial services industry and its complexities.
Asset finance delivers.
The fact is, when delivered in the right way asset leasing provides the flexibility, support, and transparency that modern businesses need. Asset finance delivers the very latest equipment at the lowest possible entry cost, enables businesses to keep up with the changes and ultimately ensure their business is always operating at peak performance. Furthermore, it delivers a highly flexible service, structured to suit business and circumstances, while enabling customers to preserve their own capital, lines of credit and bank liquidity.
If we follow these rules and continue to emphasise the benefits of asset leasing for business equipment, it will become more trusted and the first source of funding for many more companies, regardless of size or sector.