The landscape is changing for SMEs as well as independent lessors, and with it there are new skill sets coming into the leasing market. But is it the sociopolitical environment that is driving change in the world of leasing? Or is the arrival of new ways of thinking simply opening up new areas of opportunity? Tim Shand, business development director at Rivers Leasing, writes.
It is said that over half of the country has seen bank lending to SMEs fall over the last year.
One article I read noted that SMEs are considered a less stable bet than bigger organisations. Logic tells us it is a matter of individual circumstance and opinion, but if we take an umbrella view, it still seems a strangely reductive perspective; after all, SMEs are very much the backbone of industry in the UK.
For all the big shiny companies building end products like aircraft, there are vast swathes of SMEs involved in the supply chains to make those big businesses possible – the literal nuts and bolts – and so it is vital that their growth is supported.
At the same time that SMEs are facing those financing challenges, however, another change is occurring. A huge number of alternative potential finance sources have opened up in the last 10 years. These new sources are a combination of challenger banks and independent lessors.
Meanwhile, distribution channels have also adjusted, particularly with the rise of intermediaries, many of whom used to work for the banks and are often based in those business heartlands exactly where they are needed the most and demand is highest.
With the rise of these challenger banks, independent lessors and dynamic intermediaries however, comes another change in the leasing market: a new range of skills that bring fresh ideas and perspectives. There has been a rise in professionals from spheres including marketing and e-commerce joining our ranks, progressing their careers into the world of asset finance, and it is only natural that there is a knock-on effect.
View from Outside
Fresh perspectives are something that all industries and businesses can benefit from at times; after all, we only know what we know, and sometimes people see things differently from the proverbial ‘outside’, encouraging us to move away from the ‘that is the way we have always done it’ mentality.
That is certainly not to say that the traditional skill sets in leasing are in any way less relevant; it simply means that combined with additional skills, the industry has greater application and flexibility than ever before. In short, it allows us to grow, and it allows space for more variety and nuances in the market. Bringing in skills and experience from other industries and business backgrounds to work alongside traditional finance backgrounds can be a powerful force.
However, one can also cite other factors driving developments in the industry and perhaps they are the source of change. In the (hopefully) short term, there is Brexit, encouraging companies to find ways to prepare for proverbial storms and shore up cash flow. Or there is the fast-paced change of emissions regulations, illustrating the need that companies have to redirect funds unexpectedly to help finance new technologies.
Then there are the more general challenges of growing a business. With more entrepreneurs in the UK than ever before, and more people predicted to start their own companies in the coming years, there are greater numbers of SMEs that will face the inevitable cash-flow challenges of growth.
Demand and productivity requirements may provide a need for investment in new equipment to increase productivity, which almost inevitably outstrips the amount of cash in the bank, instead making financing and spreading costs over the lifetime of the asset a healthy and manageable solution.
So, what can we take from all this? Yes, the combination of the wide spectrum of risk appetites and lending product from the funders, plus easy local access to the sales operations of the intermediaries, make a powerful solution to the apparent lack of support from traditional banks.
But it is also the combination of traditional and unconventional skills in the leasing market that is making it a more relevant and powerful force for progress in businesses than ever before.
by Tim Shand