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British Business Bank: positive growth for asset finance in 2017

Research from the British Business Bank Small Business Finance Marketsreport has shown that asset finance and leasing is competing well against other products in the small business market.

The value of SME asset finance deals (up 12%) and peer-to-peer business lending (up 51%) in 2017 both showed strong growth.

Data from the Finance and Leasing Association (FLA) suggests that new asset finance volumes with smaller businesses was over £18.6bn by the end of 2017, an increase of 12% on 2016.

Although net bank lending volumes remained positive (£0.7bn) in 2017, they were weaker than in both 2016 (£3bn) and 2015 (£2bn). Significant increases were seen in 2017 in both the value and number of SME equity deals (up 79% and 12% respectively).

The report finds a decline in smaller business confidence and low demand for external finance is becoming entrenched as their cash balances rise. Bank analysis finds that, over the last ten quarters, only 1.7% of smaller businesses sought new loans, a record low since the SME Finance Monitor began in 2011.

Less than half (43%) were confident they would get a loan if they applied, even though most new loan applications (72%) are approved. Moreover, 70% of SMEs are willing to forgo growth rather than borrow, continuing a trend identified in last year’s Small Business Finance Markets report.

Total invoice & asset-based lending advances to smaller businesses continue to rise and across all sizes of smaller businesses, the BBB found.

Data from the report has shown that the number of new loans among small firms has dropped to its lowest level since 2011.

Keith Morgan, British Business Bank chief executive, said: “A core objective of the British Business Bank is to encourage greater diversity of finance, so we welcome the growth in the uptake of equity finance and other alternatives to traditional lending.

“It can’t be overstated how important it is to build a more complete funding ladder for economically important high-growth businesses no matter where they are located. Scale-ups need more long-term patient capital throughout all stages of their development to be world-beating companies, and we look forward to using our new resources allocated at Autumn Budget to unlock more of this type of capital.”

Federation of Small Businesses (FSB) National Chairman Mike Cherry, said there were positives in the report for the wider SME lending sector, especially in London and the South East.

Cherry said: “But the fact that less than 2% of UK small firms sought new loans over the last couple of years is a real concern. We’re lagging behind the US when it comes to venture capital investment in businesses to the tune of millions. That has to change.

“Lots of small firms simply aren’t up to speed on all of their options. Increasing numbers are applying for asset-based loans and exploring the P2P route which is encouraging.

When it comes to equity finance, many small businesses are hesitant about selling a stake in their firm, even though it could be the right move for them. Small firms will often start their finance journey by speaking to the bank they’ve always dealt with, leading them down a more traditional debt route that won’t suit everyone.

“There’s also the issue of low awareness when it comes to government support. More than two-thirds of firms aren’t aware of the Enterprise Investment Scheme, for example.

“The £2.5bn handed to the BBB in the Autumn will be vital to helping tackle these issues. With Brexit edging ever closer, we’re set to lose hundreds of millions in small business support from EU funding streams. We need to see further guarantees from the Chancellor that small firms won’t lose out.”

Simon Goldie, head of asset finance at the FLA, said: “The 12% growth in asset finance new business that went to SMEs in 2017 demonstrates that leasing and hire purchase are vital sources of funding for these businesses.

“Improving the growth and productivity of smaller businesses is critical to the economy, so we welcome the BBB’s plan to stimulate demand for funding by introducing a new digital information hub in Spring 2018. The knowledge-gap in business funding has persisted for too long, and continues to hamper firms in their search for the right finance product.”

Source: Verdict

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UK asset finance market breaks records

Asset finance new business reached record levels in 2017 following growth of 5% during the year, according to the latest figures from the UK’s Finance & Leasing Association (FLA).

The sector achieved its seventh consecutive year of growth, with new business levels reaching almost £32 billion last year.

The plant and machinery finance and commercial vehicle finance sectors reported new business up in 2017 by 12% and 1% respectively, compared with 2016, while new finance for business equipment was up by 7% over the same period.

Geraldine Kilkelly, head of research and chief economist at the FLA, said: “The asset finance industry reported a record level of new business of almost £32 billion in 2017, despite challenging economic conditions and subdued business investment growth.

“The latest figures also reveal that asset finance is a vital source of funding for SMEs when investing in business equipment and machinery. Of the total asset finance new business in 2017, £18.6 billion went to SMEs – 12% higher than in 2016.”

During 2017, FLA members provided £128 billion of new finance to UK businesses and households, with £32 billion of finance provided to businesses and the public sector.

FLA members financed more than one-third of UK investment in machinery, equipment and purchased software in the UK last year.

UK asset finance market 2017

Dec17 % change on

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Dec 17

 % change on

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Dec 17

 % change on

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Total FLA asset finance (£m) 2,632 +4 +4 7,861 31,769 +5
Total excluding high value (£m) 2,483 -1  -1 7,695 30,752 +6
By asset:
Plant and machinery finance (£m) 512 +1 1,515 +5 6,617 +12
Commercial vehicle finance (£m) 572 -14 1,934 -1 7,480 +1
IT equipment finance (£m) 293 +19 726 +14 2,285 +2
Business equipment finance (£m) 227 +6 624 +6 2,581 +7
Car finance (£m) 629 -2 243 +4 9,531 +5
Aircraft, ships and rolling stock finance (£m) 36 -41 60 -50 549 +20
By channel:
Direct finance (£m) 1,153  -7  3,746  0  15,477  +4
Broker-introduced finance (£m) 579 +24 1,620 +21 5,839  +14
Sales finance (£m) 752 -8 2,329 +4 9,436 +7
By product:
Finance leasing (£m) 403 +1 1,022 +5 3,809 +6
Operating leasing (£m) 511  -12 1,624 -4 6,755  0
Lease/Hire purchase (£m) 1,225 +1 4,162 +5 16,924 +8
Other finance (£m) 1,053 +19 1,053 +19 4,281 +5

Source: Asset Finance International

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UK asset finance new business holds steady

The UK asset finance market has maintained a full-year growth rate of 4% as latest figures show the market held steady during November 2017.

New figures released today by the Finance & Leasing Association (FLA) show that asset finance new business (primarily leasing and hire purchase) in November was £2.5 billion, a similar level to the same month in 2016.

The commercial vehicle finance and IT equipment finance sectors reported new business up by 5% and 1% respectively, compared with the same month in 2016, while new finance for plant and machinery fell by 3% over the same period.

Geraldine Kilkelly, Head of Research and Chief Economist at the FLA, said: “The asset finance market reported a broadly stable picture across the main asset sectors in November, and remains on course to report a record level of annual new business in 2017 of around £32 billion.”

Total FLA asset finance growth to the end of November is 4%, but excluding high value items, it is 6%.

Nov 17 % change on

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Nov 17

 % change on

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Nov 17

 % change on

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Total FLA asset finance (£m)  2,541  0 7,962  0  31,804  +4
Total excluding high value (£m)  +4  7,936  +3  30,919 +6
Data Extracts:
By asset:
Plant and machinery finance (£m)  481  -3  1,464  -2  6,506  +10
Commercial vehicle finance (£m)  691  +5  2,061  +4  7,574  +2
IT equipment finance (£m)  235  +1  642  +5  2,246  -4
Business equipment finance (£m)  209  -4  624  +4  2,566  +9
Car finance (£m)  738  -2  2,538  -1  9,854 +5
Aircraft, ships and rolling stock finance (£m)  8  -60  45  -45  574  +18
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Call for government support as asset finance grows

The UK government has been urged to support the growth of the invoice finance and asset-based lending sector in 2018 after newly-released figures revealed that demand reached record levels last year.

Data released by UK Finance shows that total sales (turnover) of clients supported by invoice finance and asset-based lending are up 4% for UK clients, standing at £214 billion for the first three quarters of 2017.

Total advances (the amount of funding being provided to clients at the close of the most recent quarter) were up 13% year-on-year to a record level of more than £22 billion for UK businesses.

Client numbers remained stable at just over 40,000 UK clients.

The data revealed that the exporting picture is particularly strong, with sales from clients through export invoice discounting facilities up 33% year-to-date for Q3 2017 and export factoring up 11% over the same period.

Matthew Davies, director, invoice finance and asset-based lending at UK Finance, said: “There is increasing understanding amongst businesses of all sizes of how invoice finance and asset-based lending can support them as they grow, and it is particularly encouraging that a substantial proportion of the sustained increases in lending we’ve seen in recent months is helping boost UK exports.

“More funding could and should be provided through invoice finance. To unlock this, the government should bring forward long-awaited legislation to give more smaller firms, in particular, access to much-needed capital.”

So-called ‘ban on assignment’ clauses are sometimes imposed by larger businesses on their smaller suppliers and can restrict the finance options available to those supplier businesses.

To address this, the UK Government is expected to bring forward revised Business Contract Terms (Assignment of Receivables) Regulations.

UK Finance represents the finance and banking industry operating in the UK, with around 300 members providing credit, banking, markets and payment-related services.

The new organisation brings together activities previously carried out by the Asset Based Finance Association, the British Bankers’ Association, the Council of Mortgage Lenders, Financial Fraud Action UK, Payments UK and the UK Cards Association.

Source: Asset Finance International

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39% of brokers expect asset finance demand to increase in 2018

Almost two-fifths of brokers (39%) believe that demand for asset finance funding will continue to increase in 2018, according to the latest United Trust Bank survey.

A quarter (25%) expected asset finance demand from SMEs to stabilise, while 8% believed lending activity would decline.

Some 28% of brokers were unsure of what 2018 had in store and selected the “don’t know” option.

When asked which industry sectors were likely to drive demand for asset finance in 2018, brokers chose the construction industry as the most likely sector, followed by transport and waste management.

Martin Nixon, head of asset finance at United Trust Bank (pictured above), said: “There’s no doubt that awareness of asset finance is growing among UK SMEs.

“Lenders, brokers and industry bodies – such as the FLA and the NACFB – are working hard to spread the word about the versatility and flexibility of asset finance and how quickly and easily transactions can be completed.

“Dealing with a professional asset finance specialist is a far cry from what’s involved in trying to raise a business loan from a high street bank or applying to increase your company overdraft.

“Brokers have known this for years, but the message is now getting through to business owners across the country, and this is good news for everyone.

“The government’s push to tackle the housing shortage should mean that construction and housebuilding companies are kept busy for the foreseeable future.

“As a result, we also expect significant activity in the funding and refinancing of new and used construction plant and machinery.”

Source: Bridging and Commercial

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The UK has the highest number of new business developments in a developed country despite Brexit

  • There were 218,000 new businesses in the UK last year, a 6% rise year-on-year. 
  • Other developed countries saw an average of just a 2% rise. 
  • Crowdfunding and peer-to-peer lending has been credited with this sharp rise in start-ups.

The UK outranked all other major developed economies in terms of the number of businesses established last year, according to figures from accounting group UHY Hacker Young.

It became home to 218,000 more businesses in 2016, a rise of 6% over year-on-year. Meanwhile, other major developed economies including France, Germany, Italy, Japan and the US saw an average 2% rise in number of businesses over the year.

The UK ranked sixth of the 21 countries studied by UHY, behind China, Pakistan, Vietnam, Malta and India. Across all the 21 countries, there was a 7.7% rise in established businesses.

“Enterprise and entrepreneurship in the UK have been gathering pace at impressive speed,” said UHY’s Daniel Hutson.

“As a range of new sources of funding gain traction in the market and the corporation tax burden lightens, the start-up climate is improving, financial pressures are easing and investment for growth is on the cards.”

UHY credited alternative funding sources, such as crowdfunding and peer-to-peer (P2P) lending, with helping to boost the entrepreneurial environment. The Conservative plan to lower corporation tax to 17 per cent by 2020 may also be helping to attract firms to the UK.

“The figures suggest confidence in the economic outlook, despite Brexit. Whether this is sustainable, given the uncertainties that still surround the ongoing negotiations with the EU, will be something the government will want to watch,” said Hutson.

While the UK had a total of 3.9 million businesses within its borders as of the end of 2016, China — which saw a massive increase of 19% — had 26.1 million.

The US fell in 13th place, with the number of businesses increasing by 2.1% over the year to 11m.

Source: Business Insider

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Pension funds, small businesses boost growth in UK alternative finance

LONDON (Reuters) – Britain’s alternative finance market grew by 43 percent in 2016, research showed on Friday, with interest from start-ups, small businesses and institutional investors helping to boost demand for services such as crowdfunding and peer-to-peer lending.

Last year, 4.6 billion pounds ($6.2 billion) was raised through alternative channels, up from 3.2 billion pounds in 2015, according to a survey of 8,300 investors and 77 crowdfunding or peer-to-peer platforms.

“Alternative finance has entered the mainstream and is likely here to stay,” said Byran Zhang, executive director of the Cambridge Centre for Alternative Finance (CCAF) at the university’s Judge Business School, which conducted the survey.

Approximately 72 percent of the year’s market volume, or 3.3 billion pounds, was driven by demand from start-ups and small businesses. That was up from 50 percent the year before.

 Peer-to-peer business lending was the largest market segment in 2016, growing by 36 percent to 1.23 billion pounds, providing an equivalent of 15 percent of all new loans lent to small businesses by UK banks.

Major banks reined in their lending in the wake of the financial crisis, and many small businesses complain of poor treatment and difficulty accessing funds.

Several alternative finance providers have sprung up to try to fill the gap, such as peer-to-peer lender Funding Circle, which announced this week it had lent more than 3 billion pounds to almost 40,000 businesses since its launch in 2010.

Another, MarketInvoice, offers peer-to-peer loans secured against businesses’ invoices and has lent 1.7 billion pounds since 2011.

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After peer-to-peer business lending, the biggest categories were peer-to-peer consumer lending, peer-to-peer property lending, invoice trading, equity-based crowdfunding, real-estate crowdfunding and reward-based crowdfunding.

Institutional investors including pension funds, asset managers and banks were also increasingly backing the platforms, the survey showed. Funding from these sources accounted for 34 percent of peer-to-peer property lending, 28 percent of peer-to-peer business lending and 32 percent of peer-to-peer consumer lending.

 Peer-to-peer lending can offer relatively high returns. Funding Circle, for example, currently boasts an all-time average annual return of 6.6 percent.

But the sector’s fast growth has also caught the attention of the Financial Conduct Authority, which is looking at introducing new regulation for the sector, highlighting concerns about past loan losses and due diligence.

This week, peer-to-peer lender RateSetter, the UK’s third-largest, reported a pretax loss of 23.7 million pounds after it took a hit from a bad loan.

Source: UK Reuters

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Lender clears £13.2bn of government loan repayments

The company behind Bradford and Bingley and Northern Rock Asset Management has paid back £13.2bn in government loan repayments.

In its six-month results up to 30 September, Bingley-based UK Asset Resolution said that of the £13.2bn repayments, £11bn was from its Financial Services Compensation Scheme debt. The company said that 76% of its government loans have now been repaid.

As part of the plan to repay the FSCS loan, UK Assest Resolution completed the sale of two separate B&B asset portfolios to Prudential and funds managed by Blackstone and launched a further asset sales process that, subject to market conditions and value for money, is expected to repay the loan in full.

Underlying pre- tax profit reduced by 41% to £238m. Mortgage accounts three or more months in arrears, including possessions, reduced by 9% since March 2017 bringing the total reduction to 89% since formation.

Ian Hares, chief executive, said: “In the first half we finalised a major sale of assets and, subsequently, we have launched the next stage of the asset sales programme designed to repay the remaining FSCS debt. These are major steps towards realising our objective of reducing the Balance Sheet while continuing to maximise value for the taxpayer. It is pleasing that we continue to see high levels of service delivered for our customers.”

It was in April that £11bn of the FSCS loan was repaid using the proceeds received from the sale of two separate B&B asset portfolios to Prudential and funds managed by Blackstone. In October, a further asset sales process was launched will enable the repayment of the remaining £4.7bn of the FSCS loan. The transaction is expected to complete during the first half of the 2018/19 financial year.

Since formation in October 2010, the UKAR Balance Sheet has reduced by £94.7bn, including £40.9bn of customer loan repayments and £27.2bn of asset sales, which have facilitated the repayment of £57.5bn of wholesale funding and £36.8bn of government funding.

As at 30 September, lending balances stood at £18.2bn (FY 2016/17: £19.5bn).

Statutory profit reduced to £216.8m from £480.4m reflecting the declining mortgage book, £43.5m additional provisions for PPI claims and the prior year benefiting from a £51.0m profit on sale of loans and an insurance recovery of £50.0m in relation to remediation losses incurred by NRAM in 2012.

The number of mortgage accounts three or more months in arrears, including those in possession, reduced by 9% from 4,617 at March 2017 to 4,196 at 30 September 2017. The total value of arrears owed by customers has fallen by £2.5m from March 2017 to £35.2m, a reduction of 6.6%. This reduction is a direct consequence of proactive arrears management coupled with the continued low interest rate environment.

In total, UKAR has 139,000 customers (FY 2016/17: 148,000), with 149,000 mortgage accounts (FY 2016/17: 158,000) and 32,000 unsecured personal loan accounts (FY 2016/17: 35,000).

The company said that the majority of these loans continued to perform well with more than 93% of mortgage customers up to date with their monthly payments. In addition, UKAR continues to provide oversight of the 98,000 accounts (56,000 customers) sold to Prudential and Blackstone as part of an interim servicing arrangement.

Source: The Business Desk

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Distiller secures finance to acquire historic Rosebank site

IAN MACLEOD Distillers has secured a funding deal worth £80 million, revealing that the finance will be used to underpin its recently-announced acquisition of Falkirk’s historic Rosebank Distillery.

The Broxburn-based distiller, which owns the Glengoyne and Tamdhu single malts, said it will also use the loan package to drive its organic growth ambitions.

The asset finance facility, which has been jointly provided by Bank of Scotland and PNC Business Credit, is secured against the distiller’s whisky stocks. Its most recent accounts show that the value of stock held by the firm stood at £76.5m at September 30, up 14 per cent on the year prior.

As part of its new funding deal Bank of Scotland will provide Ian Macleod, which acquired Edinburgh Gin last year, with day to day banking services, including a £250,000 overdraft facility.

It comes shortly after the distiller announced that it is set to restore production at Rosebank Distillery, which has been silent since 1993.

Ian Macleod has agreed a deal to acquire the stock and trademark from Diageo, while securing a separate agreement to purchase the site from Scottish Canals, subject to planning consent. Rosebank Distillery sits on the banks of the Forth & Clyde Canal.

Mike Younger, finance director at Ian Macleod Distillers, said: “Bringing the iconic Rosebank distillery back to life is a big project, and one that we’re incredibly excited about.

“We are very pleased that we now have a funding package which allows us to both rebuild Rosebank and fund the general expansion of the business.

“Asset based lending is ideal for us, as it provides highly flexible funds secured against our appreciating maturing whisky stocks.”

Source: Herald Scotland