"It has been a good year, we recorded growth compared to last year. It is a fairly tough market out there though," says managing director of Bibby Leasing, Carol Roberts.
The lessor, as part of Bibby Financial Services (BFS), is in the third year of a five-year strategic growth plan aiming at improving the group’s position in the UK finance market.
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Over the past 18 months, Bibby Leasing’s hard asset finance team in Warrington has grown, with Roberts revealing to Leasing Life that the lessor will recruit more employees in the next six months.
Roberts says the lessor has been mostly financing assets through leasing rather than hire purchase.
The majority of Bibby Leasing’s clients are SMEs seeking finance for either hard or soft assets, with the company’s average deal standing at £32,000 (43,600).
Roberts attributes the increased popularity of leasing among SMEs to technology, suggesting that SME owners are increasingly searching on the internet for available finance routes.
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By GlobalData"SMEs are becoming more educated with what is out there," says Roberts. "Nowadays, because of technology, SME executives can go online and have a look at all the finance options. I think that is increasingly driving SMEs towards leasing products and away from bank loans. Previously funders used to go out in the market in order to win customers."
The importance of a digital presence for business growth was acknowledged by BFS, which over the past 12 months has increased its social media presence as part of a wider strategy to improve engagement with its customers and partners.
A spokesperson for BFS told Leasing Life: "We see this as a positive way to enrich the conversations we have with our clients and there’s a keenness for SMEs and intermediaries to engage with content across platforms such as Twitter and LinkedIn."
Roberts says competition in the UK leasing market has toughened, following the entry of new funders – such as challenger banks – and the return of some who exited during the credit crunch.
In addition, she believes that private equity investment has started to change the ‘shape’ of the market. "There have been a lot of acquisitions and obviously those companies are looking to grow their own book," Roberts says.
The increased competition has affected the pricing in the market, with finance rates decreasing.
Roberts specifically highlights the extent of the drop in soft asset finance rates, which she deems "not correct".
"Pricing rates have fallen dramatically because everyone is chasing volumes," she says. "Pricing has been driven down in the soft asset market to a level where the rates being offered in some instances are less than a hard asset, which in my opinion is not correct. Many funders faced with smaller volumes, entered the soft asset finance market, squeezing rates down. Rates should be higher in this market in order to compensate for the risk."
The low rates in association with the improved business confidence have boosted new leasing volumes. According to the Finance & Leasing Association (FLA), new leasing business reached £27.1bn in the 12 months to June, surpassing its pre-crisis peak of £26.7bn.
Despite the market growth, Roberts believes the high number of players presents an obstacle for those targeting a larger share of the market.
She says: "The FLA figures show that there has been year-on-year growth but I think that companies cannot take a bigger slice of the pie because of the number of funders now operating in the market."
On the other hand, Roberts highlights that there’s sufficient business for everyone in the market, but the amount of business opportunities depends on the segment of the market in which a lessor operates. n
