Asset Finance Funds a Third of UK Business Investment
A buoyant asset finance industry funded a third of all UK investment in machinery, equipment and software over the last 12 months, according to the latest figures from the Finance & Leasing Association (FLA).
At 33.3% of all investment in these asset classes, it is the highest level for more than eight years. And in the 12 months to July this year, FLA members provided some £31.780 billion worth of asset finance, a 7% increase on 2016.
There was solid growth across a number of industry sectors. For example, the plant and machinery finance sector grew by 15% to £6.546 billion, while business equipment finance also grew by 15% to £2.563 billion.
New car finance was also on the up and rose by 7% over 12 months to £9,788 billion, while new finance for commercial vehicles grew by 4% to £7.529 billion for the 12 months to July.
David Foster, Managing Director at Anglo Scottish commented:
“These latest figures confirm the importance of asset finance to the UK economy and British businesses. Our Group is certainly growing and benefitting from the buoyant market and we are funding an increasing share of it.”
What were the most common finance methods?
The results for all asset finance classes showed growth in three main finance products: hire purchase, operating leasing and finance lease.
Hire purchase, the most popular funding method, was up 12% to £4.476 billion in the three months to July and over 12 months increased by 10% to £16.603 billion.
Operating leasing, meanwhile, rose by 10% to £1.794 billion in the three months to July and over the previous 12 months grew by 8% to £7.090 billion.
And finance leasing was up by 5% in the three months May-July to £1.033 billion, although it dropped slightly over the 12 months to £4.036 billion.
Why is asset finance so popular?
The popularity of asset finance with businesses is down to a number of key operational factors.
Asset finance is ideal for funding major capital projects, raising finance for mergers and acquisitions or replacing or maintaining depreciating assets such as a new computer system, plant and equipment, machinery or vehicles.
With asset finance, payments can be scheduled into manageable monthly instalments, making the investment more affordable, with less immediate impact on cash flow.
Crucially, it also allows businesses to exploit market opportunities quickly by being able to obtain the equipment and assets required without first having to build up the necessary cash reserves.
It also means that funds do not have to be tied up for long periods in products which have unpredictable resale or residual values, which again helps the cashflow of the business.
At the same time, asset finance offers significant tax benefits as payments are fully tax deductible, while low, fixed payments allow easy budgeting throughout the term of the finance period.
And by employing asset finance, the cost of the purchase can be spread across the life of the asset and in line with the return on investment, thus matching costs to revenue.
What’s the best solution?
The three most popular methods based on the latest figures are finance leasing, operating leasing and hire purchase, and all have their advantages.
Experienced finance providers, like Anglo Scottish Asset Finance, should be able to draw on their expertise to discuss the most suitable finance arrangement from the funding methods available.
And they should also provide a consultative approach which quickly identifies the key needs of your business.
Once these objectives have been clearly identified, your finance provider should work with you to offer the type of funding that will help your business do what it needs to do.
Choosing the right provider should give you access to asset finance solutions suitable for a huge array of equipment across a wide array of sectors.
Talk to your finance provider
Any investment decisions should typically involve your finance provider, and many businesses seek independent means of finance because of better rates of interest or less onerous terms than some of the traditional bank-based finance lines.
Independent asset finance specialists, like Anglo Scottish, can provide solutions to many business finance needs, based around a long experience in the asset finance arena, across a host of industry sectors.
These can include finance solutions for a whole series of asset classes, such as new cars, plant and machinery, IT equipment, printing machinery, agricultural machinery, commercial vehicles – and many more!
It’s important to discuss the solution that best suits your own business needs before making that final investment decision. This may be to optimise your cash flow, take advantage of short term windfalls or spread your payments over the longest possible repayment period.
Guide to asset finance solutions
To help businesses make better informed investment decisions, Anglo Scottish has produced a useful guide to selecting the most appropriate asset finance solution.
The guide which is available to download here compares and contrasts the main funding options and also explains the responsibilities associated with each main funding method, as well as considering who will be the overall owner of the asset.