24 September 2009

Admission of leasing to Enterprise Finance Guarantee scheme would kick start capital investment by smaller companies

The Government has missed out on a big opportunity to boost SME funding by failing to include leasing in the planned extension of the Enterprise Finance Guarantee scheme says Syscap, a leading independent finance provider.

The Government is to extend the Enterprise Finance Guarantee (EFG) scheme to include funding of businesses through invoice discounting. However, despite repeated submissions by industry, the Government has decided not to include lease financing into this extension of the EFG scheme.

Under the scheme the Government guarantees up to 75% of new funding to a business with a turnover of under £25 million. Until now the EFG has only applied to funding through traditional loans.

Syscap explains that lease financing is seen as one of the most flexible methods for SMEs to make capital investments:

• Leasing does not impact on a businesses’ other credit lines giving the company concerned more scope to borrow money when they need it in the future.
• Leasing allows a company to upgrade their equipment when it becomes obsolete
• Most leasing arrangements, unlike loans, would not have a negative impact on a balance sheet

Comments Philip White, Chief Executive of Syscap: “Businesses fund the [vast bulk] of their capital investment through leases so it makes little sense to exclude leasing from the EFG scheme.”

“If the Government includes leasing in the EFG the cost of leasing would fall and the availability of lease financing would increase.”

“UK SMEs need to make capital investments, not just to help the economy in the short term but to improve their competitiveness in the long term.”

“The banking crisis saw a lot of funders of lease financing withdraw from the UK market. We have made progress in attracting funders back but adding lease financing into the EFG would speed the process considerably. UK SMEs need that help now.”

“We certainly hope the Government will review the EFG as quickly as possible and take this step forward.”

According to statistics from the Finance & Leasing Association (FLA) the total amount of new UK business asset finance deals in the year to June 09 at £23.6billion was 21% down on the £30billion of the previous year.

See coverage of this press release below:

Telegraph.co.uk

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