The news broke this month that ABN Amro managing director and start-up specialist George Ashworth has agreed to join Virgin Money, which, as the UK challenger bank mentioned in its results, would bring about the bank’s ‘Virgin’ entry into the SME lending world.
A spokesman from the former Northern Rock outfit was pretty cagey as to specific details about this new commercial finance unit.
Go deeper with GlobalData
Access deeper industry intelligence
Experience unmatched clarity with a single platform that combines unique data, AI, and human expertise.
But you don’t hire a senior asset finance specialist with the experience of Ashworth to lead your new outfit without giving away a big old hint as to what might be prioritised in this SME finance offering.
It would be good to see asset finance getting the recognition it deserves from decision-makers on the board at Virgin and I’m sure Ashworth will do as good a job there as he’s done with ABN Amro.
It’s worth considering the factors that make asset finance such a strong player, when other close relations like the invoice financing and bridging finance markets haven’t had such a smooth growth story.
A market where the vast majority of lessors have fantastic expertise and a legacy in the market; a nationalised network of distribution with expert knowledge; market flexibility over arrangements for securing the asset; and huge competition leading to great rates for businesses are part of the story.
The Funding for Lending Scheme certainly has a part to play with the draw of new entrants to the sector, as do generous grants from via the British Business Bank for growth capital to seed into the SME market.
But apart from government incentives which can have a fixed shelf life (think about the cleaving of the green asset finance market via the withdrawal of government subsidises, as we see in Sotiris Kanaris’s article on the European green asset market) there are some factors which are market generated, and show that the leasing market can attract big banks and big businesses independently.
I’m thinking of the 23rd month of consecutive growth in the UK, as described by the FLA, which is providing some serious double-digit returns for companies buying into the sector.
For banks, given European regulatory capital controls, leasing is extremely capital efficient with low relative risk and strong returns.
Who knows, we might even see the European securitisation market kick back into action which would give the bankers a real reason to see credit run more freely into the market.
For private equity, it’s a buzz market with more deals to come in the next month or two, so I understand.
And for UK SMEs, the opportunities haven’t been better in a long time.
