Bank lending to leasing companies recovering

Bank lending to leasing companies has jumped 17% during the past 18 months, recovering from a slump that began at the start of the recession.

New data from independent finance provider Syscap found that outstanding bank loans to leasing companies stood at £27.2bn in August 2012, up from a 20-year low of £23.2bn in May 2011.

During the same period, bank lending to all businesses fell 5%, from £438.7bn in May 2011 to £417.1bn at the end of August 2012.

Syscap explains that demand for leasing is on the rise, with businesses increasingly turning to leasing rather than using traditional bank loans or overdraft facilities.

Many businesses have expressed their concern that traditional credit facilities, such as overdrafts, can be withdrawn at almost no notice. Even long-term loans can be withdrawn from businesses if the company’s turnover or profitability falls below a level set by the bank. Lease finance, however, stays in place just as long as the business is able to make its payments.

Philip White, CEO of Syscap, said: “Leasing has become the funding source of choice for many solid small businesses, offering a more secure way of funding investment or expansion than traditional bank loans or overdrafts. It is a vital source of funding for businesses that want to invest in new assets such as machinery and IT.

“It’s great to see that banks are responding to this demand by providing more finance to businesses through the leasing sector.”