We recently ran a survey that found only 24% of businesses use asset finance to fund their equipment purchases. The survey collected responses from 500 SME owners and decision makers, and was done to help us understand how our products and services are viewed by the business community.
Do they know what finance solutions are available, and if so, how many use them as part of their finance strategies? For asset finance, we found something quite surprising.
Of those surveyed, 79% know of asset finance, but only a small proportion of them actually use it. The reason could be they don’t need finance, or they are financing their equipment by other means.
But it is hard to ignore the 55% who know of asset finance and are not using it, and even harder to ignore the remaining 21% that don’t know what asset finance is. We need to bridge that gap.”
Asset finance as a tool for growth
When it comes to our client base, they all have one important thing in common. They use asset finance to fund growth. This could be growing their capabilities by funding new and innovative technology; they could be growing their capacity by bringing in new equipment or making their operations more efficient by upgrading machinery.
The universal potential of asset finance is it helps a business move forward. For a business that has the capital to invest in new equipment, asset finance is arguably unnecessary. In reality though, a business that has strong working capital still has other financial priorities that may put investments in new equipment on hold.
Asset finance is a valuable solution for all businesses because it brings forward investments that can essentially open new revenue streams, and it does so without draining a business of its capital.
Demand for asset finance is high
Despite our survey figures, and the potential apathy in the business community towards asset finance, demand for our services at Time Finance remains high. In fact, an ever-increasing proportion of our portfolio now have structured solutions as we support more and more clients with profiles that complement sector demand.
This is in spite of recent data from the Finance and Leasing Association, which showed that total asset finance new business fell by 7% in April this year. This was the first drop in asset finance new business reported by the FLA for some time, but things improved in May and June when there was a lift of 6% and 23% respectively in equipment finance new business compared to the same months last year, according to the FLA.
While April’s figures look like a temporary blip, we need to pay attention. We’re potentially seeing a dip in businesses’ enthusiasm for asset finance, but it’s nevertheless important we have a ready supply of finance and an open door.
Helping businesses benefit from asset finance
If a lack of awareness or a potential misunderstanding of asset finance are our challenges, then the onus is on us to help educate the SME community. The best way to do this is to have an open conversation. If a business is looking for finance, it’s important we understand what it’s for. If they are looking for a loan, is that loan going to fund new equipment? If so, would it be more affordable for the equipment to be leased?
At Time Finance we’re keen to keep our finger on the pulse of what businesses need and want from us. Our focus is on making asset finance as accessible and affordable for them, to ultimately make sure it aids their growth and that of the wider economy.
Steve Nichols, managing director of asset finance at Time Finance
