Data from Time Finance have revealed changing appetites amongst SMEs for financing for the long-term as demand for hire purchase and refinancing rise throughout 2023.
The recent data from the leading SME lender has shown a 26% rise in its hire purchase deals between its 2021/22 and 2022/23 financial years. This demonstrates increased appetite for longer term investments in hard assets, particularly in industrial businesses such as manufacturing and construction.
Further indicating a longer-term focus for SMEs, Time Finance is also seeing a rise in demand for refinancing, which it predicts will be the solution of choice for SMEs in 2024 as more businesses look to unlock working capital to finance growth plans.
The reports of rising demand follow a record year for Time Finance, with a hike in the number of asset finance facilities packaged between its 2021/22 and 2022/23 financial years contributing to 18% growth in the SME lender’s overall lending book.
Time Finance’s insight mirrors data from the Finance & Leasing Association (FLA), which saw asset finance new business (primarily Leasing and Hire Purchase) grow in August 2023 by 19% compared with the same month in 2022. In the first eight months of 2023, new business was also 15% higher than in the same period in 2022.
Steve Nichols, director of asset finance at Time Finance, said: “We are seeing some interesting shifts in demand for asset finance, all of which point toward there being cautious optimism amongst businesses, but a renewed focus on thinking about the long-term. There has been a considerable lift in enquiries for refinancing from our brokers and what this tells us is that businesses are being smart about how they unlock working capital. What they do with this obviously varies; some inject it straight back into growing the business, others utilise the cash for a management buy-out and of course there are some that use the capital to ease cashflow challenges.
“Alongside increasing enquiries for refinancing, we’re also seeing a trend for hire purchase with those deals increasing by 26% in our last financial year. When we consider that hire purchase is typically used for assets that hold their value, there is a synergy between the rise in hire purchase deals and the uptick in queries for refinancing. To me this shows that more businesses are embracing the potential of asset finance, and building it into their long-term financial planning.
“In times of economic instability, traditional lenders become more risk averse, and the options available to businesses diminish as a result. That is completely counterintuitive; businesses need flexibility in a finance provider and the trends we are seeing in asset finance indicate that more and more SMEs are waking up to the potential of alternative finance.”
