The year asset finance came into its own

Jon Maycock is commercial director at Propel Finance

This was the year that asset finance proved its true value for businesses across the UK. During one of the toughest years for business in living memory, many supportive asset finance providers stepped up to champion SMEs and offer urgently needed funds – enabling businesses to trade on throughout the year and, in some cases, emerge even stronger.

With the UK spending most of 2020 under some form of lockdown restrictions, it has been a year of unique challenges and major adjustments for all organisations. Despite all of this, it hasn’t been one devoid of any positives. Here we look at how asset finance has fared over a year in which finance agility became more important than ever before.

A year of challenge, but also opportunity

At the start of the year, SMEs generally had an optimistic outlook. There was greater clarity about the UK’s economic position, and there was a noticeable shift towards businesses achieving not just tactical short-term plans, but strategic medium and long-term plans too. Members of the Finance & Leasing Association (FLA) provided a record £35.7bn of finance to the business sector and public services last year, up 6% on 2018, representing over a third of UK investment in machinery, equipment and purchased software.

Despite such a promising start, everything changed in March. Ever since the health and economic crisis began, one of the priorities for many organisations has been the need to build business resilience in order to survive. As a result, asset finance grew in importance, with businesses seeking to preserve and lock in their existing lines of credit.

Under the government-backed CBILS (Coronavirus Business Interruption Loan Scheme), smaller businesses who suffered lost or deferred revenues as a result of COVID-19, were able to access funding support to continue trading during the pandemic.

In addition, cash has become king, with its preservation and conservation vital for safeguarding organisations against the dual threats of both the pandemic and the closing of the Brexit transition period. In this challenging environment, asset finance really came into its own as a leading funding solution, supporting businesses to emerge stronger and even grow and thrive.

It has continued to support the hard-pressed manufacturing sector enabling organisations to make investments in smart technologies, driving business transformation and operational efficiencies. Alongside this, asset refinance has separately risen to prominence for its capability to unlock reserves of working capital previously tied up in assets.

The year has also seen a growing recognition that equipping for productivity and performance provides a crucial competitive edge, with the pandemic putting increased focus on digital enablement in particular. With the ‘great shift’ to working from home, there has been increased requirement for both software and hardware investment and acquisition.

One of the brightest advancements in the asset finance arena has been both the accelerated adoption of existing technology, such as web-based finance portals and eSig capability, coupled with the ability to plug in to customers’ technology solutions such as CRM systems and web-shops. The latter in particular has enabled providers to redefine the user journey to enhance the asset finance experience from end-to-end. It’s allowed rapid access to urgently needed finance and will ultimately enable more SMEs to finance equipment quicker, easier and more conveniently than ever before.

Some unexpected developments

During the course of the year numerous SMEs were brave enough to avoid standing still and pushed ahead without freezing any new investments if they could. Instead, they saw the period of uncertainty as a time to double down and move forward, framing the situation as a positive opportunity to make changes such as equipping themselves with the technology to drive competitive advantage at a time when it would be understandable for many businesses to retreat.

Consequently, staying competitive in the new business and economic environment has required a change of practices for many companies and a popular business growth strategy in 2020 has been dubbed the pandemic pivot. Those organisations that successfully changed their business model are likely to find it pays dividends far beyond the pandemic.

There was also some cause for optimism for business, according to October’s Make UK research report which showed an increase in the share of manufacturers operating at their pre-Covid levels – rising from 17.8% to 24.3%. There has been some further good news with asset finance deal sizes steadily increasing. The time has arrived for SMEs to start considering what steps to take next to ensure they are in the strongest possible position to move forward.

Rising to the challenge

Throughout 2020 a wide range of sectors, from manufacturers, to retail, agriculture and service-based businesses have faced some serious challenges to their operations and even threats to their survival. During this most challenging of times asset finance has stepped in to provide immediate access to the most efficient equipment, plant and machinery and vehicles available, showing its real value by helping organisations to realise their opportunities for growth.

Looking ahead, there’s no doubt the coming year will involve many challenges and sacrifices and asset finance will continue to play a vital role in helping Britain’s businesses and supporting them in achieving their goals and come out stronger.

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