A report from the Finance & Leasing Association (FLA) revealed a modest but stable rise in asset finance, with new businesses seeing growth of 2% in January 2025 compared to the previous year. It’s an incremental increase, but it could signal growing confidence and practical advantages in the sector. But why is asset finance seeing this upward trajectory, and what does it mean for businesses in real terms?
What Makes Asset Finance Popular?
Asset finance has been a popular option for a number of years, predating the recent uptick in usage. At its core, it offers businesses the chance to get equipment, vehicles, machinery, and other assets while spreading the costs over an agreed period.
It’s a powerful way to preserve cash flow, as – unlike standard business loans – asset finance allows for structured repayments that are tailored to match your revenue streams. This means you’re less likely to find restrictive terms or hefty upfront repayments. As an approach, it, therefore, reduces your initial capital outlay, freeing up funds for other expenses or investments.
Economic Factors Are Driving Asset Finance Growth
Economic uncertainty and shifting market dynamics have driven businesses to think twice about how they manage their capital and invest in growth. High interest rates and stringent lending criteria from traditional lenders have made standard business loans from these providers a less attractive prospect. The comparative ease and flexibility of obtaining asset finance are becoming more and more appealing.
Flexibility is a Major Advantage
Versatility remains one of the top benefits of asset finance. In our experience, the ability for businesses to choose from leasing, hire purchase, and other tailored funding solutions is hugely popular. This range of options gives companies the opportunity to choose the financial products best suited to their particular needs and circumstances.
Take equipment leasing, for example. These agreements let firms regularly update machinery so that they always have access to the latest technology without bearing the financial burden of outright ownership. On the other hand, a hire purchase means your company owns the asset at the end of the agreement through manageable payments, spreading the financial impact while eventually securing asset ownership.
Sector-Wide Growth and Adoption Trends
Data from the FLA highlights widespread adoption of asset finance across various sectors, with IT equipment and commercial vehicles seeing the largest growth, 18% and 11%, respectively. There was also modest, steady growth in finance surrounding large-scale projects like aircraft, ships, and rail rolling stock.
The largest growth in different types of finance products was operating leases, with a 4% increase and lease/hire purchase agreements, with a 2% increase. Broker-introduced finance saw no meaningful change in usage from the previous year, while sales finance saw a spike of 7%.
What do these changes mean?
The specific trends reported by the FLA could be reflective of a number of causal factors. The boost to IT equipment finance could be a result, at least partially, of the UK’s adoption of hybrid and remote working models. In recent years, more businesses have been compelled to invest in modernising their IT infrastructure to support working from home.
Regarding commercial vehicles, this uptick comes at a time when the UK’s e-commerce sector is booming, resulting in the consequent expansion of logistics and delivery services. The sector is predicted to grow even further, by around 7% by 2030, which necessitates larger commercial fleets to meet the increasing demand for last-mile delivery.
As for investment in aircraft, ships, and rail rolling stock, this could be linked to government investment in large-scale infrastructure projects. The Autumn Budget allocated over £100 billion in capital investment over the next five years, with a major portion earmarked for transport infrastructure.
Specifically, Network Rail’s expenditure of £67.4 billion in operating, maintaining, renewing, enhancing, and financing the national rail infrastructure clearly shows the scale of spending in the rail sector.
What Does This Mean for the Future?
The recent growth trend reported by the FLA suggests that asset finance will continue to rise. While interest and inflation rates are – to an extent – stabilising, the global economic situation remains unpredictable. This means that accessible, flexible, and responsive financial solutions will likely continue.
Looking For Asset Finance from a Trusted Provider?
At Bluestar, we specialise in connecting your company with the best asset finance solution tailored precisely to your needs. If you’re looking to upgrade technology, invest in sustainable energy, or get a stronger grip on your strategic finances, our team of experts is always on hand to guide you throughout the process.
We like to keep things simple for you, supporting you in accessing competitive rates, flexible terms, and quick decisions. Our experience and relationships span the finance industry, so you can be confident of the best funding option for your growth ambitions.
To find out more about how we can help you, get in touch with our team today. Just call 01256 581 111 or email us at hello@bluestarleasing.com.
FAQs
What types of assets can typically be financed?
Assets commonly financed might be industrial machinery, agricultural equipment, vehicles, IT hardware, and commercial equipment.
Is asset finance suitable for small businesses?
Absolutely. Asset finance is perfect for businesses of all sizes, including those seeking new business funding as well as small businesses. This is thanks to its flexibility and manageable repayment terms.
Does asset finance impact a company’s credit rating?
Typically, asset finance has a minimal impact on a business’s credit rating, provided repayments are made promptly. However – as with all borrowing – missed payments could negatively affect credit scores.
