New research from the Finance & Leasing Association has revealed that asset finance companies are cautiously optimistic about business lending over the next 12 months in spite of the troubles many firms have experienced in recent months.
Its most recent quarterly Asset Finance Confidence Survey, which questioned senior executives of the FLA’s Asset Finance Division earlier this month, found that 74% are expecting an increase in business lending in the next three months. This is 6% higher than the corresponding study undertaken three months ago.
An even higher proportion expect a rise in lending over the next 12 months (77%) in the hope UK businesses find it easier to access the funding they need in order to grow and therefore boost the economic recovery.
The figures follow other recent news from the FLA that its members advanced £2.9 billion of new finance to SMEs in the final quarter of 2011 for investment in equipment and machinery. This, coupled with the latest figures from the Asset Based Finance Association revealing £16 billion was released to its members’ clients in Q3 2011, demonstrates just how effective asset based finance has been at plugging the funding gap that Project Merlin has failed to fill, according to Bank of England statistics.
As a result, 72% of those surveyed expect a slight improvement in domestic economic conditions over the next 12 months, which is up 2% on the previous survey, which was conducted in November 2011.
Geraldine Kilkelly, Head of Research and Chief Economist at the Finance & Leasing Association, said: “The cautious optimism shown in the survey reinforces our message to the Government that asset finance has a key role to play in improving the supply of credit to SMEs.
“Asset finance helps small businesses get the equipment they need to compete in tough trading conditions. It is an affordable alternative source of finance for a huge variety of products and equipment.”
Asset finance includes facilities such as hire purchase and finance leases, enabling businesses to purchase new equipment, plant and machinery to support growth without tying up valuable cash – a significant challenge facing the UK’s SME community in recent times.
While hire purchase allows firms to hire an asset from a leasing company in return for regular payments, giving your company full ownership of the asset following the completion of the hire contract, finance leases allow businesses to use an asset a specific time period.