Vendor finance rises as banks fail to lend

IT equipment finance rose by 11 per cent in Q1 as banks missed Project Merlin targets

More UK firms are turning to asset finance in the face of banks' continued reluctance to lend, new figures suggest.

According to data from the Finance & Leasing Association (FLA), total asset finance rose eight per cent annually in Q1 to £4.86bn. Finance arranged by equipment dealers and distributors rose by 24 per cent £1.2bn.

The pattern held for the IT sector, with IT equipment finance rising by 11 per cent in Q1 to £243m.

The FLA's research comes shortly after the UK's big banks confirmed they have missed their Project Merlin target for Q1 by £2.2bn.

Philip White, chief executive of finance provider Syscap – which flagged up the FLA's research – said: "Vendor finance is increasingly seen as the way around the roadblock caused by the reluctance of some banks to lend to SMEs."

Syscap also cited a recent survey of IT vendors by Leasing Life which found that 63 per cent of vendors expect demand for vendor finance to increase this year.

"Vendor finance allows businesses to invest in the new plants, machinery and IT they need without having to go cap in hand to an unsympathetic bank," added White.

"It allows UK machinery and IT suppliers to unlock the sales that would not otherwise go ahead."