Huge upturn in UK asset lending attributed to small business turn away from bank lending

The asset finance industry funded almost 32% of all UK investment in machinery, equipment and purchased software in 2015.

Peter Alderson, head of small business finance provider LDF (pictured above), said this was part of a trend for firms to turn to non-bank lending to grow.

He added: ‘The Bank of England’s recent credit conditions survey suggests that loans to fund merger and acquisition deals have crowded out lending to small and medium-sized enterprises. This may support the migration of SMEs to leasing firms rather than banks for finance.’

Alderson stressed: “UK businesses have seen their order books rapidly expand in recent years and are now targeting additional finance options to meet demand and continue this expansion further.

“Leasing has become increasingly popular amongst SMEs as a catalyst for growth, especially given the difficulties many still experience in sourcing finance through traditional means.

“The Bank of England’s recent Credit Conditions Survey suggests that lending to fund M&A deals has crowded out lending to SMEs, this may further support the positive migration   of SMEs turning to leasing companies rather than banks for finance.”

Asset finance allows businesses to borrow the cost of a capital investment upfront, and spread the repayments across fixed monthly payments, helping businesses to clarify their budgets and contain costs.

Peter Alderson added: “As the amount of borrowing through asset finance approaches pre-2008 levels, many UK businesses are optimistic and looking to make the investments that may have been put on hold over the last few years.”