IT vendors increasingly seeing asset finance as way to unlock sales
The use of asset finance to fund business investment in IT has jumped 13% in the past 12 months, as businesses embrace asset finance as an affordable way to make vital acquisitions and upgrades that would otherwise be out of reach, says Syscap, the leading independent finance provider.
According to figures from the Finance Leasing Association, the volume of asset finance used to acquire IT and software in the past year to April 2013 rose to £1.384 billion, compared with £1.227 billion in the previous 12 months. The jump follows a 15% increase on the year before that.
Syscap points out that this healthy growth comes at a time when bank lending continues to be tight. Recent Bank of England data shows that bank lending to UK businesses fell by nearly £3 billion in April alone, and £300 million less was lent under the Government’s flagship Funding for Lending Scheme in the last quarter.
Comments Syscap Chief Executive Philip White, “IT leasing is continuing to grow apace, as more and more vendors are seeing asset finance as an ideal way to secure sales which would otherwise stall given the continued reluctance of banks to lend, and businesses become increasingly comfortable with the concept.”
“Many companies that put investment plans on hold during the recession are now desperately in need of new equipment and upgrades or they risk losing their competitive edge.”
“Without the option of asset finance many firms, particularly SMEs, would really struggle to swallow the upfront costs of a major IT investment. Many simply wouldn’t be able to afford it at all. If that holds back business efficiency and innovation then of course that’s bad news for UK plc.”
Companies recognising that benefits go beyond providing basic funding solution
Philip White adds that with bank lending continuing to fall, leasing presents not only an accessible solution – but one which crucially also has many other benefits for businesses as well.
“What attracts many potential customers to leasing in the first place is that it provides a solution to the basic problem of funding. But what’s really boosting growth is that vendors are now successfully demonstrating that the advantages of asset finance go well beyond this,” he says. For example:
- Stability of fixed instalments. Spreading the expenditure across fixed monthly payments helps to clarify budgets and contain costs, allowing the user to combine different IT requirements, for example hardware and software, in one package. It also enables companies to optimise cash flow and improve their bottom line by not having to add to the debt held on the balance sheet.
- Facilitates long term planning. Many companies also like the fact that asset finance can help them to plan more easily for the long term too. While some forms of traditional bank lending, such as overdrafts and even long-term loans, can be withdrawn at any time, lease finance stays in place as long as the business is able to make its repayments.
- Flexibility. Additional functionality such as new software or cloud computing is easy to bolt on as necessary as customers grow in size or expand into new areas so that vendors can always ensure they are providing the optimum service to customers.