The British Business Bank’s tenth edition of the Small Business Finance Markets Report has identified growth in asset finance lending for small businesses.

The report, which has analysed the evolution of small business finance markets from 2014 to 2023, reveals a 7% increase in new business for the asset finance sector, reaching £23.5 billion in 2023.

This surge underscores the resilience of the asset finance market, particularly in the post-pandemic landscape. The overall market momentum echoes this trajectory, registering 12% increase and reaching a historic nominal level of £38.3 billion, according to the report.

BBB: Small Business Finance Markets 2023/2024

Detailed insights from the report showcase the nuanced growth rates across quarters, emphasising the sector’s post-pandemic recovery. The direct impact of regulatory changes, including the permanent full expensing of asset purchases, is evident in the market’s robust performance. However, challenges persist for specialist leasing businesses, unable to fully leverage these allowances, the report authors write.

Louis Taylor, CEO of British Business Bank, said: “This year’s report sees a continuing increase in businesses seeking alternative finance options, evidenced by further growth from challenger and specialist banks, and asset finance providers. This is indicative of a persisting trend of finance markets offering a wider range of finance to smaller businesses with diverse finance needs.

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“Although equity investment fell last year to levels last seen immediately prior to the pandemic, it is still healthy by historic standards. While there was a decline in activity in the second half of 2022, it is positive to note that investment appears to have stabilised in 2023, and at a relatively high level when looked at over the longer term.”

Simon Goldie, Director of Business Finance at the FLA, said: “As the report notes, asset finance plays a significant role in helping smaller businesses to invest and grow, so its availability will be crucial over the coming years for both the recovery of UK business investment and achieving net zero targets.

“The British Business Bank goes on to say that it will continue to support asset finance providers via products such as the Recovery Loan Scheme, ENABLE Funding and the Investment Programme.

“We would like to see the same support from Government, with a replacement for the RLS, and leasing included in full expensing so that more businesses can invest efficiently to drive productivity.” 

FLA members provided £151bn of new business in 2023