Addressing the UK SME funding gap
4 November 21
4 November 21
It is no secret that COVID-19 has introduced unprecedented economic pressures, which has in turn forced us all to reflect on our priorities. There is now a growing recognition that the financial sector has the power to do more to deliver sustainable growth, opportunities, and outcomes. One example is the role of leasing and the positive impact it can have on society.
For over 18 months, organisations have faced enormous disruption. Many have been forced to decrease output, cut jobs, change their business model, adopt new technology, develop new offerings, and expand existing product lines. Any management team looking to secure capital will have experienced constrained capacity in the capital markets, a change in lending appetite, and an increase in the scrutiny of applications.
Leasing strategies can and should play a crucial role in relieving financial pressures across both the public and private sectors. But despite the rapid growth of the non-bank lending sector in recent years, there is still a significant portion of groups including UK SMEs, public sector and corporates that remain underserved by mainstream lenders. Additionally, despite the crucial services that they provide to society, these groups do not typically have sophisticated ESG approaches.
However, there are lenders actively working to support these groups and meet their needs for efficiency and liquidity. Since becoming signatories to the PRI in 2019, Triple Point has used Environmental, Social & Governance (ESG) criteria as an additional risk assessment framework. The leasing and lending team has aimed to innovate and develop a value-adding approach to ESG integration that reflects the specific challenges of ESG in debt issuing. The goal is to support borrowers by taking an approach which provides efficient decisions while also developing a more relationship-driven process.
Securing funding fast
No service has felt the effects of the past 18 months more than the NHS. It has faced one of its greatest challenges – and certainly the greatest demand for its services – since it launched in 1948. The pandemic has brought into sharp focus the need for timely, high-quality critical care equipment, such as ventilators and ambulances, which can help the health services respond as best they can.
Leasing is well-suited to the needs of the NHS, and the public sector more broadly, at times such as this because such agreements enable the NHS and Councils to benefit immediately from new equipment and technology but spread the cost of these new assets over several years. With capital budgets seriously constrained, leasing can ensure our frontline services have the resources they need now rather than wait until restricted budgets allow. For example, in March 2020, Triple Point fulfilled a request from a regional county hospital to provide ventilators for its Intensive Care Unit. In a process that often takes weeks, Triple Point was able to issue the order to the ventilator supplier in a matter of hours after the lease was awarded to Triple Point.
Driving benefits- both financial and societal
Leasing and Asset Finance has long been a leading product of non-bank lenders indeed long before the term non-bank lender was used. As an example, since inception in 2007 the Triple Point’s leasing and associated lending portfolios have provided over £900m of finance and Triple Point now employs more than 30 people in this sector.
Leasing also provide prime opportunities for investors. In this low-interest-rate environment, it can offer investors attractive yields uncorrelated to traditional asset classes. Through Triple Point leasing and lending solutions, investors support a broad range of groups in the public and private sectors that are fundamental to our economy, from NHS Trusts and Local Authorities through to UK SMEs.
These entities, like almost everyone in the UK have been severely impacted by the pandemic and require support to protect essential services and where appropriate maximise their growth potential.
Triple Point welcome opportunities to finance assets for a range of UK entities and are also interested in portfolio acquisition where this aligns to our investor and ESG mandates.
In an era where investments are scrutinised more than ever, we are pleased that the Triple Point leasing and lending strategies are delivering both financial and societal benefits.
This article was written by Neil Richards, Triple Point's Head of Leasing and Lending.
This article was originally published in Leasing Life.