If it looks like a duck, and quacks like a duck !

The very fact that the phrase ” credit crunch ” has almost disappeared from the news, does not mean in fact that the crunch has lost its bite. If anything, it is tightening its grip.  Let me explain, after 4 years, the lack of capital in the debt market shows we are more in a credit crunch than ever. Take the Merlin lending scheme, much heralded by the Bank of England when it was launched. The latest figures show that after nine months into the project, only £25bn of gross lending has reached its intended destination against an annual target of £76bn   The banks say that there is a low rate of acceptances by their customers. I simply wonder if this low acceptance rate is anything to do with the conditions that then banks put on their loans?

Lets move on from the banks, well slightly. Let me explain. Most of the banks own their own leasing companies. As in previous blogs concerning  the Basel agreement, the new conditions of tier 1 capital is now forcing many of the bank leasing companies to either close off entirely,  or simply reduce the amount that they can lend. This constriction of bank debt will increase as next year will bring a further round of paying back capital to various central banks, and thus reducing the amounts available to their leasing arms.

Only yesterday,  the Bank of England’s Financial Policy Committee  has declared that big British banks need to raise more capital as protection against possible future losses. This bland statement clearly shows that some of the UK banks will have to find more capital. The other way for the banks to increase their tier 1 capital  ratio is simply reduce the amount that they will lend to the UK economy, i.e. Companies & SME’s.

The independent leasing companies will undoubtedly increase their amounts lent, but will  not come close to covering the potential shortfall. So there you have it, growth needs funding, funding is limited, so it follows that growth will too be limited. However it is times that these where you have to think out of the box.

Forget what you used to do, that  could simply not be sufficient.  In every recession, new firms either emerge, or existing ones turn to new areas. Oak is emerging as the leasing company  of choice for many UK, and EU companies who are looking to markets other than their own countries. The days of just calling  your existing  UK funder to see if they know anyone who can help you in Europe have almost gone. Oak realised that the opportunity was there, and seized it with both hands.  This week Oak has just been chosen by a Hamburg based company who  is expanding into the UK, to offer a leasing solution to their new UK customers.  This company was fully aware of the tightening financial situation and knew that they had to have in place a leasing solution for their customers. Everyone praises hindsight, but actually foresight is far more valuable.

The opportunities are there for every company, so if you need to talk an opportunity through in regard arranging  European equipment leasing , just call Oak to help  guide you through.

So although the phrase “credit crunch” has almost gone,  in reality it is very much apparent. As Douglas Adams put it so succinctly “If it looks like a duck, and quacks like a duck, we have at least to consider the possibility that we have a small aquatic bird of the family anatidae on our hands.”






This entry was posted in Equipment Leasing, European Leasing, leasing for SMEs. Bookmark the permalink.

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