What Funding Choices Do Businesses Have? Bank Lending v Leasing

It seems that companies still can’t rely on bank lending to fund business growth. Meantime, asset finance and leasing is going from strength to strength and continues to help breech the widening gap between business equipment funding requirements and bank lending.

In June 2013 UK bank lending fell again, despite government attempts to reverse the trend through its Funding for Lending Scheme (FLS). Bank of England data showed that net lending fell £300m in the first quarter of 2013 and that while lending to individuals was up, crucially loans to businesses were down.

Earlier this week, the British Bankers’ Association published key lending data by postcode for England and Wales. It showed that of 120 postcode areas, only 22 showed an increase in borrowing by small and medium sized businesses last year.

In order to try and boost lending, Chief Secretary to the Treasury Danny Alexander has today (24th July 2013) announced that major UK banks will reveal details from January of their lending in thousands of local areas.

He hopes publishing lending data across 10,000 postcode areas will boost credit to homeowners and small businesses and encourage competition by helping smaller lenders to identify gaps in the market.

Whether or not this initiative bears fruit, companies and SMEs in particular are well advised to protect existing cash flow and lines of credit by considering leasing for their new business equipment, IT technology and other essential assets.