Funding drought over as banks increase lending to leasing businesses
According to Syscap, a leading independent finance provider, outstanding bank loans to leasing companies stood at £27.2 billion in August 2012, up from a 20-year low of £23.2billion in May 2011. During the same period, bank lending to all businesses fell 5%, from £438.7billion in May 2011 to £417.1billion at the end of August 2012.
However Syscap added out that lending to leasing companies is still far from the level it was at prior to collapse of Lehman Brothers and the on-set of the financial crisis (£35.2billion in September 2008).
Syscap said that demand for leasing is on the rise, with businesses increasingly turning to leasing rather than using traditional bank loans or overdraft facilities.
Many businesses have expressed their concern that the traditional credit facilities, such as overdrafts, can be withdrawn at almost no notice. Even long-term loans can be withdrawn from businesses if the company's turnover or profitability falls below a level set by the bank. Lease finance, however, stays in place just as long as the business is able to make its payments.
Says Philip White, CEO of Syscap: ‘Leasing has become the funding source of choice for many solid businesses, offering a more secure way of funding investment or expansion than traditional bank loans or overdrafts."
‘It is a vital source of funding for businesses that want to invest in new assets.
‘It's great to see that banks are responding to this demand by providing more finance to businesses through the leasing sector. It is the one of the few areas of the finance industry that is increasing funding to businesses.’
White said that banks are now more enthusiastic about lending to leasing companies, thanks to the investment that the industry has made in improving credit checking processes.