Report Shows Leasing Growing Source for SME Finance

A report from Leaseurope indicates that leasing is becoming an increasingly important source of European SME finance, with 51% of those surveyed in 2014 using leasing, up from 43% the year before.

“SMEs undoubtedly play a vital role in providing jobs (2 out of every 3 in Europe) and in stimulating economic growth, making them a key focus of policymakers,” said Enrico Duranti, chairman of the Leaseurope Board and general manager of Iccrea BancaImpressa. “This report demonstrates that leasing is an important form of investment finance for the SME sector and that promotion of this market would boost SME growth in the future.”

SMEs in the eight countries in the sample financed 19% of their total investment via leasing in 2013, more than any individual form of bank lending – up from 17% in 2010. This compares to a leasing penetration rate of 12% in 2013 (13% in 2010) for businesses of all sizes in the same countries, which implies European SMEs use leasing to finance a greater proportion of their investment than larger businesses, to an even greater extent in 2013 than previously. Micro firms in particular rely on leasing, with 15% of their 2013 investment financed this way compared to 10% in 2010.

Evidence in the report highlights that exporting and growth SMEs, whose investment needs are generally higher, rely on leasing to an even greater extent than other firms. Not only do exporting firms use leasing more but they use it more intensively, financing 20% of their investment via leasing as opposed to 18% for non-exporters. Similar results are seen for growth firms with almost a quarter (24%) of their investment financed through leasing, significantly more than the 18% for non-growth SMEs.

According to the report, SMEs that use leasing invest 123% more than non-users of leasing, more than twice as much. This divergence is largely due to lessees increasing their investment substantially in 2013 compared to 2010, whereas non-users’ investment levels remained flat. These lessees finance more of their investment through leasing (31%) than any other form of finance, including bank lending and cash/equity. Micro lessees appear to benefit the most, experiencing the largest investment increase in 2013 relative to other firm sizes.

Leaseurope’s estimate of the total value of SME leasing in the eight countries of the survey sample is €74 billion ($81.5 billion) for 2013. Scaling this up to the EU level implies that the overall size of the market for leasing to SMEs in Europe was just over €103 billion ($113.5 billion) in 2013, equating to roughly 9.2 billion SMEs. As such, SMEs account for nearly half the total leasing market in Europe.

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