Flexible financing provides for technology growth as traditional lending approvals plunge

Business lending approvals have been at a record low in 2022. Not only is the number of business loan applicants down, with fewer than one in ten (9%) small businesses applying for finance in Q1 2022, but only a small fraction of applicants are successful. According to the SME Finance Monitor Small Business Index, the share of application approvals now rests at a dismal 43%.

This comes as the post-pandemic recovery of 2021 saw the lowest levels of gross bank lending since 2013, following the 2007-2008 global financial crisis.

With traditional loan approvals waning, access to cash and managing cash flow tops the list of concerns for the companies now seeking financing. The knock-on effect is that B2B providers along the supply chain – from suppliers, distributors, networks and MVNOs, manufacturers and lenders – have experienced lags and lost opportunities as their customers cannot obtain the financing needed to invest in their growth and provide for business needs in equipment updates and expansion.

Along the tech supply chain, flexible financing models have provided a much-needed route to business growth. Innovative financing solutions, such as leasing through a multi-lender online portal, allow organisations to resolve their technology needs quickly, easily, and without relying on the disclosure of cumbersome company financial reports.

Approvals for lease applications are far greater than approvals for traditional lending applications. Simon Fabb, Director of technology financing firm, Lease Group, explains:

“Businesses could get a loan directly from a bank; however, an increasingly attractive option is leasing. Unlike traditional banking loans, eight out of ten finance lease applications are currently being approved with same-day turnaround times. This is owing to the security placed against the asset, whereas loans are approved purely based on the financials of the business.”

Fully tax-deductible leasing provides an opening for both businesses and supply chain providers to alleviate the cash flow concern as companies can access the equipment needed now without disrupting the company’s cash flow.

Simon comments that it’s not just SMEs that choose to lease their technology as a means of managing cash flow and financing future growth:

“While leasing is excellent for helping smaller businesses access technology, the significant financial advantages mean that many large corporations also choose to lease their equipment, even when they have the budget to purchase up-front. In fact, 80% of the FTSE 500 lease their telecoms and IT equipment, so there is lots of scope to further expand the leasing model into the world of tech.”

By considering alternative financing arrangements, companies of all sizes and industries can find affordable solutions for managing cash flow while investing in the latest technology equipment without the upfront costs of purchasing outright. Leasing technology yields flexibility for companies planning budgets and forecasting in the next financial year and beyond.

Simon concludes that there are many financial benefits for the lease model to finance business needs:

“By leasing their tech, organisations can eradicate the up-front cost and earn the freedom of diverting their investment into other, more profitable business activities.

“Also, through leasing, businesses will earn the added benefit of offsetting each monthly payment against corporation tax, providing even greater savings and financial benefits.”