Quantitative easing? Try quantitative leasing, says lender

Syscap has called on the Government to put more money into small businesses by buying up lease-backed securities.

by Emma Haslett
Last Updated: 06 Nov 2012
It was only this week that the International Monetary Fund suggested governments might like to think a bit more about providing some sort of stimulus to their economies, rather than just slashing costs as quickly as possible. And one firm has come up with an interesting suggestion as to how: invest in leases, the contracts made between lenders and businesses that allow them to buy assets, such as machinery. According to finance provider Syscap, the Government could provide some welcome relief for businesses, while boosting the economy, by buying up lease-backed securities.

It’s not actually a completely new idea: in the last round of quantitative easing, the Government put £25m worth of cash into lease-backed securities (although the rest of the £198bn went into gilts). Syscap says that by purchasing leases from banks, it would free up cash for banks, allowing them to write new leases - which, in turn, would cause the cost of leasing assets to drop. It’s win-win - particularly if you’re a small business that’s been hit by the latest drop in lending.

Of course, being a credit provider itself, Syscap has something of a vested interest, and was keen to extol the virtues of leasing: apparently, it doesn’t impact on business’ other credit lines, which means they can borrow again if they have to; and allows them to upgrade their equipment sooner, rather than later. And crucially for the Government’s ambitions for a return to ‘Made in Britain’-style manufacturing, it also fuels investment in actually making stuff. What’s not to like?

Of course, as with all credit arrangements, leasing does have its downsides: if businesses can’t keep paying, they’ll lose the asset - and in straitened times, it may be easier to own an asset outright, rather than having to keep up monthly payments. But, considering the Government is expected to engage in another round of quantitative easing at some point in the near future, it might provide more help to cash-strapped SMEs than simply buying up even more gilts.

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