Why leasing is more important than ever for British SMEs

Posted: Tuesday, 3 September 2019 @ 11:36

"If it appreciates, buy it. If it depreciates, lease it” said John Paul Getty, the oil tycoon said to be the richest man in history.  So why did this leader amongst businessmen extol the virtues of leasing, and why is it arguably more relevant than ever today in the UK?

The concept of leasing is not a new one.  In fact, it’s a pretty traditional idea, especially when it comes to supporting the growth of businesses.  Most of us don’t need a lesson in why leasing assets can be beneficial to businesses, over owning particular items of equipment. It can make cash flow easier, it makes it easier to keep equipment relevant and it can be a valuable tool in helping companies have the flexibility to grow. 

So why do we think leasing is more relevant than ever for businesses today? 

There’s an appetite for growth

We often talk about the growth in the volume of SMEs over the last 10 years, but the appetite for entrepreneurialism is still very much there. Research shows that Millennials and Gen Zers are 183% more likely to choose to start their own business than baby boomers. Meanwhile, over half (50.4%) aspire to grow over the next 12 months despite fears about Brexit.

However there’s also anxiety 

It’s unlikely to come as a massive surprise that people are a bit anxious at the moment. There’s a lot going on. So it’s only natural that there’s a certain amount of anxiety. As a result, it’s estimated that around 34% of small business owners expect access to finance to become more difficult following the UK’s departure from the European Union. The result is that the use of alternatives to traditional bank lending is continuing to grow, up by 7% in April overall and 9% for business equipment finance sectors.

The value of SMEs to the UK economy

We hear a lot about the state of big businesses, and of course those are extremely valuable, not least because many of them source smaller items and parts from SMEs in a financial and commercial ecosystem. However, it’s worth nothing that total employment in SMEs is around 16.3 million or 60% of all private sector employment in the UK according to the FSB. Furthermore, the combined annual turnover of SMEs was £2.0 trillion, which equates to around 52% of all private sector turnover. So it doesn’t take a rocket scientist to appreciate the integral value of SMEs in the UK, the sum of which makes it all the more important for us to collectively support its individual parts and find solutions to help them continue flourishing.

Brokers and lenders provide solutions 

For a while now, newcomer and challenger banks as well as independent lessors have been rising to the challenge of supporting SMEs where traditional banks have not been best placed to.  At the same time, the distribution channels have adjusted, particularly with the rise of intermediaries and brokers. These intermediaries are based all across the country, invariably located close to the businesses that need them. The combination of the wide spectrum of risk appetites and lending product from the funders, plus the easy local access to the sales operations of the intermediaries make a powerful solution for SME funding.  For our part, we believe that, used wisely, leasing can play an important role in making that happen.


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