The SME market for cars and LCVs is an opportunity for motor retailers and one helped by the availability of finance.
While the latest Bank of England figures show the annual growth rate of lending to SMEs at a record low, MotoNovo increased lending to SMEs seeking their next car by 55 per cent over the last year, with lending volumes to corporate customers increasing year-on-year by 50 per cent overall.
The UK’s SME sector is significant. At the start of 2021, there were 5.5m small businesses (with 0 to 49 employees); this was 99.2 per cent of total UK businesses.
The sector represents an impressive three-fifths of the employment and around half of the turnover in the UK private sector. In terms of numbers, that equates to 12.9m people employed in small businesses.
The long and short of it is that the SME sector is significant. As owner operators or employers, businesses in the sector drive a considerable number of new and used cars, vans and other vehicles. Many of these will require finance from one source or another.
Assessing the mood of the 0 to five employee business and despite the challenges of higher energy bills, inflation, war in Ukraine, 62 per cent of founders were still confident their business would grow in 2022. This was the feedback from more than 1,000 small early-stage firms with typically 0-five employees, which contributed to the most recent Enterprise Nation Small Business Barometer.
MotoNovo’s growth in lending to SMEs is in stark contrast to the broader picture reported by the Federation of Small Business (FSB), which has said recently that SME finance applications had plummeted to the lowest level on record.
The situation saw the FSB’s national chair, Martin McTague, note that: ‘Lenders pulling up the drawbridge for small firms will threaten our already faltering economic recovery.’
MotoNovo, which has enhanced its business finance capability, matching this with a desire to increase market share in the new and used vehicle financing sector, has aligned its ambition with action.
Over the last 12 months, MotoNovo has delivered:
• 50 per cent growth in lending volumes to corporate customers
• 22 per cent growth in LCV lending volumes
• 55 per cent growth in lending volumes to SMEs to purchase cars
MotoNovo has helped SMEs by providing well over £100m of vehicle finance over the last year. The lending is not linked to a single vehicle as 1400 SMEs financed two or more vehicle purchases.
Looking forward, we remain very ambitious for ourselves and our dealers in terms of SME lending. The FSB’s research on SME borrowing notes that while 61 per cent of businesses seeking funding sought traditional overdraft and/or loan products, only 25 per cent applied for asset-based finance, a definition that included invoice finance.
While not immune from the prevailing economic conditions, dealer finance can be very competitive and has the advantage of being ‘secure’, which typically helps acceptance levels. Dealer finance is also quick and easy to set up and frees up other borrowings.
Find out more about MotoNovo here.
Pictured: Debbie McKay commercial director, MotoNovo Finance