New lending via asset financing has increased by 9.7% annually, totalling £31bn, with the service and construction industries driving this growth to the greatest extent.
Sirius Property Finance analysed total asset finance lending, the industry sectors utilising it to the greatest extent, as well as the most common assets financed.
Asset finance allows businesses to grow by removing the high upfront cost of acquiring much needed operational equipment, instead allowing them to pay an agreed amount over a period of time.
There is no need for the company to provide additional collateral as the asset itself is the collateral, with the asset finance provider also often responsible for the maintenance of the asset and its replacement if faulty, as well as any depreciation in its value.
Asset finance is a popular choice for many businesses as it is often cheaper than other forms of financing although it can come with restrictions such as limits on the use of the equipment, mileage for example, while most financing is also often short-term.
The analysis by Sirius Property Finance shows that last year, commercial vehicles were the most common asset acquired by UK businesses, accounting for 29% of new lending, followed by company cars (27%) and plant and machinery equipment (23%).
Asset finance as an option to drive business growth is increasing in popularity. The latest figures show that in 2022, there was £34bn in new lending, a 9.7% increase on the previous year.
Discover our Asset Finance Broker services.
The services sector was the driving force behind this uptick, accounting for 65% of total new lending last year, with the construction sector accounting for the second largest proportion at 10%. The agricultural and manufacturing sectors also accounted for a sizable amount of activity, accounting for 8% of total lending a piece.
Managing director of Sirius Property Finance, Nicholas Christofi, commented: “Asset financing is a great way to support company growth without the need of an outright cash lump payment. Whether it’s the lease of equipment, a finance lease, an operating lease or contract hire, there are numerous ways asset financing can help a business to expand and it’s a more versatile and often more cost effective route when compared to other financing options.
“In the current economic climate it’s also growing in popularity, allowing many businesses to plan for the future at a time when they may not have the disposable income to do so. This means that when the economic picture does start to brighten, they are poised to hit the ground running, rather than playing catch up with their competitors.”
By Rozi Jones
Source: Financial Reporter