Enterprise Finance Guarantee scheme - Business and Enterprise Committee Contents


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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