Memorandum submitted by the Finance &
Leasing Association
The Finance & Leasing Association (FLA)
is the main representative body for the motor finance, consumer
credit and asset finance (leasing and hire purchase) industries.
In 2008, our members provided £30 billion of new asset finance
to the business sector and UK public services, representing almost
30% of all fixed capital investment in the UK other than property.
We support the objectives of the Enterprise Finance
Guarantee (EFG), as part of a package of Government measures to
help businesses. At present, the EFG only covers term bank loans.
The EFG should be extended to include asset finance. Companies
with five or more employees are just as likely to use asset finance
as term bank loans. Asset finance is secured largely on the asset
being financed. It is economical, flexible, and certain as finance
is provided for fixed periods. Term bank loans are often not good
substitutes for asset finance.
We believe that the administrative burden on
small businesses of the EFG could be reduced. We have discussed
with the Treasury an alternative arrangement by which the Government
could share the risk of new asset finance lending. Unlike the
EFG, the fee would be paid by asset finance providers. The risks
to the Government would be lower, because the lending is backed
by assets. Businesses would apply for finance in the normal way,
but would be more likely to have their application approved. This
arrangement could help to close the gap of at least £5 billion
per year between current and normal levels of asset finance lending
to businesses.
May 2009
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