Less than a third of UK companies say they have used asset finance or plan to use it in the next year, according to a recent survey that found that just 29% of respondents said their firms had used asset finance, and only 26% were planning on using it in the next twelve months.
What’s Stopping Businesses Using Asset Finance?
Why are businesses missing out on the potential benefits asset finance can provide? It may be that they are not aware of the benefits, or that they don’t know enough about asset finance to feel confident in pursuing it. When businesses have been turned down from other funding, they may not consider asset finance as a potential alternative.
Businesses have also been fairly cautious recently when it comes to borrowing. As Arkle Finance managing director Daniel Bailey explained in his recent article for The HR Director, businesses are wary of taking on more debt, and bank lending to businesses slumped by £1bn in December 2018, with loans to SMEs decreasing at the fastest rate in three years. This is all despite the optimism produced by a rise in the pound and a small breakthrough in Brexit negotiations in December. Add to this, a recent survey also found that just 11% of business owners described their firm’s working capital facilities as “very strong” even though their businesses are doing well. This illustrates an overall feeling of trepidation for SMEs when it comes to finances.
Why Are Some Businesses Turning To Asset Finance?
However, many businesses among those surveyed did recognise the benefits of asset finance. 20% of businesses who had used asset finance did so to purchase new equipment while protecting their cash flow. 15% used asset finance because they had been unable to extend their overdrafts, and 10% had been turned down for a formal loan from their bank. 13% said asset finance allowed them to raise funds and release capital against unencumbered assets.
For these businesses, asset finance is a way to secure the equipment they need in order to continue doing their daily business or even expand, without having a large negative impact on their bottom line. Requiring funding for new equipment and assets doesn’t need to be a barrier to growth. The more that businesses recognise this, the less they will need to rely on loans and overdrafts, and the more likely they will be to be able to borrow without fear.
If you would like to find out more about how asset finance could be beneficial to your business, get in touch with Arkle Finance. Contact us online using the form on the right or call 01933 304899.