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Why asset finance could be the answer to SMEs growth dilemmas

Why asset finance could be the answer to SMEs growth dilemmas

For most businesses, even ones turning over millions of pounds each year, purchasing new assets can have major financial implications on their cash flow. While some SMEs have put their growth plans on hold following the UK’s decision to leave the EU, new figures indicate that the time could now be ripe to re-invest in technology and other necessary equipment to strengthen their competitive advantage.

According to independent forecasts compiled by the Treasury, Britain’s economy is expected to grow faster this year than was predicted even before the referendum took place. Economists now anticipate growth of 1.9pc for 2016, making a mockery of suggestions that Brexit would send the UK spiralling into recession.

Growth considerations

Even if the UK’s economy continues to remain resilient, all businesses face common challenges around expansion and consolidation, none more so than SMEs who are now responsible for 60% of UK private sector jobs and 47% of turnover.  Moving up a gear requires investment, whether that be in physical assets, staff, research and development, or sales and marketing. Without very deep pockets, it’s nigh on impossible to grow a business on a stable footing without financial support.

Purchasing new assets can be vital in ensuring the future success of an organisation. But this can be cost prohibitive if SMEs elect to pay for all new investments upfront in one lump sum. Turning to high street bank overdrafts or expensive credit cards can also have a detrimental impact by tying up a business’s working capital.

Spread the cost of new investments

Specialist alternative finance providers, such as Wesleyan Bank, can help businesses to spread the cost of new investments made this year into 2017 and beyond to support their growth aspirations without them having to dip into vital cash reserves.

Tailored asset finance solutions can cover all kinds of asset investment including IT hardware and software, business and office equipment, plant and machinery, commercial vehicles, premise refurbishments, office relocations and more. By electing to pay over time from one to five years, SMEs can benefit from having greater flexibility and control over their finances and maintain existing banking lines. Customised finance plans also allow them to gain access to the equipment and assets they need to flourish, without being constrained by a large upfront price tag.

The rise of asset finance

More and more SMEs are seeing the value of asset finance and alternative finance solutions with firms operating in the manufacturing, financial services and professional services sectors most optimistic about their chances of increasing revenues over the next year. Standing at £29.1 billion, the UK asset finance industry is now the fourth biggest market globally and the largest in Europe having experienced double digit growth for two consecutive years. It now funds over 30% of investment in machinery, equipment and purchased software in the UK.

Leverage the Annual Investment Allowance

As well as exploring alternative finance options, SMEs should seek to take advantage of the Annual Investment Allowance (AIA). The AIA helps businesses to write off the cost of certain assets against profits in the year of purchase up to £200,000, bringing much quicker tax relief against capital expenditure compared to spreading the relief over several years. Most assets purchased for business use will qualify as expenditure, with the exception of cars and items either gifted or owned prior to the formation of a business.

Compete or get beat

Given the UK’s current political and economic uncertainty, it is only natural for SMEs to be cautious about making financial investments. However there is an equal risk in failing to seek support to maximise profitability and take advantage of emerging market opportunities. If you don’t, your competitors will. By speaking to a specialist provider to understand the plethora of asset finance options available, businesses can approach the next 12 months in full confidence that they no longer have to be reliant on traditional sources alone or take unnecessary risks in pursuit of growth.

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