Pan-European study reveals leasing by small businesses rose by 19% in 2014

Of those SMEs who did not lease in 2013, more than a quarter had done so in the past, with 17% of these stating they would use leasing in 2014.

SMEs in the eight countries in the sample financed 19% of their total investment via leasing in 2013, more than any individual form of bank lending – up from 17% in 2010. This compares to a leasing penetration rate of 12% in 2013 (13% in 2010) for businesses of all sizes in the same countries, which implies European SMEs use leasing to finance a greater proportion of their investment than larger businesses, to an even greater extent in 2013 than previously. Micro firms in particular rely on leasing, with 15% of their 2013 investment financed this way compared to 10% in 2010.

Evidence in the report, which was carried out by Oxford Economics, highlights that exporting and growth SMEs, whose investment needs are generally higher, rely on leasing to an even greater extent than other firms.

Not only do exporting firms use leasing more but they use it more intensively, financing 20% of their investment via leasing as opposed to 18% for non-exporters.

Similar results are seen for growth firms with almost a quarter (24%) of their investment financed through leasing, significantly more than the 18% for non-growth SMEs.

According to the report, which was carried out in Q3 2014, SMEs that use leasing invest 123% more than non-users of leasing, more than twice as much. This divergence is largely due to lessees increasing their investment substantially in 2013 compared to 2010, whereas non-users’ investment levels remained flat.

Micro lessees benefit the most

These lessees finance more of their investment through leasing (31%) than any other form of finance, including bank lending and cash/equity. Micro lessees appear to benefit the most, experiencing the largest investment increase in 2013 relative to other firm sizes.

The SMEs surveyed were asked what advantages of leasing are most important to them. A diverse array of benefits was valued highly and most have increased in importance since 2010. This suggests a growing appeal for leasing amongst SMEs, with benefits fitting diverse business needs.

While no single reason stands out particularly, the price of financing an asset via leasing relative to other forms of finance remains the most popular reason for leasing in 2013. Lessees being better able to manage their working capital by spreading payments over the life of the asset and the flexibility provided by lease contracts also rank as important benefits.

The compilers report: “Our estimate of the total value of SME leasing in the eight countries (Germany, France, UK, Italy, Spain, Netherlands, Poland and Sweden) of our survey sample is €74 billion for 2013. Scaling this up to the EU level implies that the overall size of the market for leasing to SMEs in Europe was just over €103 billion in 2013, equating to roughly 9.2 million SMEs. As such, SMEs account for nearly half the total leasing market in Europe.

Long term trend

In the report, projections for GDP growth based on a greater uptake of leasing under various scenarios show a potential impact on growth rates of between three and 10 basis points per annum for the eight countries sampled. Set against the estimated eurozone long term trend growth rate of 1.6% per annum, this boost is significant and would add an extra 0.3% to 0.7% to the level of GDP by 2020, equating to an additional €34 billion – €100 billion.

Tanguy van de Werve, director general of Leaseurope said: “Leasing to SMEs has been a priority of Leaseurope’s research programme, starting with our pioneering first report in 2011. This topic is key to our industry, with the new report demonstrating the increasing importance of leasing for Europe’s small businesses.”

Enrico Duranti, chairman of the Leaseurope Board and general manager of Iccrea BancaImpressa added: “SMEs undoubtedly play a vital role in providing jobs (two out of every three in Europe) and in stimulating economic growth, making them a key focus of policymakers.

“This report demonstrates that leasing is an important form of investment finance for the SME sector and that promotion of this market would boost SME growth in the future. Given this fact, European and national initiatives aimed at improving SME access to finance should be raising awareness of leasing, as well as facilitating its use. Ideally placed as a reliable and well suited form of finance for smaller firms, leasing can play a crucial role in ensuring European SME investment and, in turn the European economy, go from strength to strength.”