An image that became familiar during the global Covid pandemic was that of cargo ships anchored around the world’s busiest ports as major manufacturing hubs closed.

For UK SMEs, that meant extending the life cycle of assets and equipment as new stock wasn’t readily available. Additionally, any new assets produced were typically purchased by larger businesses in bulk.  

Whilst factories are now open again and new equipment supply is normalising after a disrupted two-year period, businesses are still dealing with after effects.

Asset scarcity

Research conducted on behalf of Paragon Bank’s SME Lending team showed that 38% of SMEs have acquired pre-owned machinery because of the scarcity of new variants to purchase. Just over a quarter of businesses (28%) have also acquired used commercial vehicles, with 23% purchasing used technical equipment.

A third of companies (36%) also stated that they used an existing asset longer than they had planned, with 31% signalling that they refinanced an existing asset. 

As more new assets become available and existing equipment reaches the end of its cycle, SMEs have a decision to make – do they buy new, used or continue to extend? Regardless of which route they choose; asset finance should come into their thinking.

Asset finance facilitates the purchase of equipment to grow businesses, without the need to use readily available capital. It also provides the option to spread costs over a longer period.

Used assets

In some cases, a business can use their already owned assets - such as machinery – as security against a loan from a funder. Alternatively, where a new physical asset is required by a business, the funder will provide the loan for the asset and the business will repay the money in regular sums.

Ian Galbraith, Paragon Bank SME Lending Head of Broker, says: “As SME lending specialists, Paragon is privileged to work with fantastic brokers on a daily basis and there is clear demand from businesses to replace existing assets and expand operations with new technology.

“The welcome news for SMEs, brokers, and lenders is that the challenges of recent years are starting to dissipate. Equipment availability is improving, delivery times are speeding up, and the cost of borrowing is hopefully set to fall as the year progresses.”

Visit our SME Lending Asset Finance webpage to learn more about our services.