the talk from delegates at this year’s EEF manufacturing conference
(see opposite), I was struck by a real sense that a balance has
been tipped in the perennial struggle to drive growth in the SME
Strikingly, it seemed the
big issue in business finance- at least from the point of view of
the manufacturing sector – was no longer access to finance, but
whether businesses wanted it in the first place.
When the recession first
hit, small businesses were by turns perplexed, enraged and deeply
worried by the sudden reticence of large banks to make funding
available. Access to funding was the problem that needed to be
fixed, and those able to offer funding through asset finance
suddenly had a spectacular USP on their hands.
“Our doors are open” was
the marketing message broadcast by Aldermore during its well-timed
entrance into UK banking, and has been the attitude that has driven
some very successful years for Close Asset Finance (a tip of the
hat due here to departing CEO Roger Stone, interviewed on p10).
Just in the last two
weeks, new bank Shawbrook has entered the UK asset finance arena
through the acquisition of Singers Asset Finance, while United
Trust Bank has signalled the start of a broker-powered expansion
led by ex-IBJ sales head Martin Nixon. While I can’t speak for
either organisation, I would imagine a good part of the attraction
of building an asset finance business at present (discounting the
margins involved) is the increased strength of the sales
proposition driven by the continued paucity of cheaper
I get the feeling,
however, the situation may be changing. Is the simple fact of
having money to lend enough to ensure increased business in
The UK’s banks fell very
slightly short of the SME lending targets set by the Project Merlin
initiative last year. But can this be put down to the now-familiar
cliché of tight-fistedness among the giant lenders, or has the
amount of credit offered to British businesses simply managed to
satiate a hugely depressed demand from SMEs?
The Credit Conditions
Survey published quarterly by the Bank of England only intensifies
the question, asserting that credit made available to SMEs in
quarter one of this year was largely the same as that in the fourth
quarter of 2011, but that demand for credit from SMEs had
Anecdotal evidence from
those I speak to in this sector seems to support the idea that a
lack of finance applications from SMEs may be more of a factor in
Britain’s lack of growth than the reticence of banks to lend.
Philip White of Syscap summed it up most succinctly, saying: “Yes,
we are seeing increased competition – but our biggest competitor is
the decision not to invest.”
This is “Rusting Britain”
as forewarned by the FLA: a nation of assets being sweated long
past traditional replacement cycles. But why is demand slack?
Is it because SMEs have
become too dispirited about the possibilities of accessing finance
to even attempt it? If so, this remains the leasing industry’s time
Or is it because business
lending in general is tightening both in price and lending terms
(also reported by the BoE Credit Conditions Survey)? If this is the
case, there’s all the more reason for asset finance providers to
beef up the service value in their offerings, to give potential
customers a better-than-ever sense of value for money.
Maybe, it’s just that
businesses, hammered by the latest round of predictions of a
further bout of recession, don’t want to take on debt in yet
another year of repetitive and demoralising economic confusion. In
which case, who can blame them.
There seem to be more and
more equally justifiable explanations for SME stagnation, but very
few answers to the problem. Whatever your experience of SME demand
versus asset finance sector supply, I am keen to hear your views,
especially if they contradict what’s suggested above.
Good luck out