If you are a business owner, then you would be forgiven for thinking that there is an ever decreasing number of financing options available, and even if you find an open door, the acceptance criteria is onerous.
Bank of England research shows that there is around £25billion of new lending to business every quarter. Though new lending is being masked by businesses paying down debt, and the high street banks say there is simply a lack of demand. Certainly the demand for new finance has fallen – only minorities of businesses are undergoing rapid expansion that requires significant growth funding – but the need for refinance is very much on the agenda. According to the Government’s latest report, Financing a Private Sector Recovery, the level of refinancing by businesses is expected to peak in the next three years.
Most business owners still try to rely on bank funding in the form of loans or overdrafts, to sustain working capital or for capital expenditure. However, following the credit crisis, the banks’ criteria for refinance have become increasingly stringent. What is most surprising is that so many businesses only choose to access traditional forms of bank lending. Of the 4.8m UK Small businesses only 20% use leasing. Few businesses seek advice when looking at financing options and so are unaware of the choices available.
Asset finance, whether leasing or hire purchase, alleviates cash flow pressures and allows for expansion; is also a sensible funding method during an economic recovery. It enables business to be more flexible, grabbing opportunity, reducing fear of over-trading.
Given the restricted availability of other methods of funding, and the appetite of the leasing community to do business, HardSoft Computers expect to see a higher demand for leasing and particularly computers. However, a lack of awareness and a false perception that leasing is a facility of “last resort,” has dampened demand. New businesses should also consider leasing as a key source rather than a last resort.