Is Asset Finance Underutilised By SME’s?

Recent research indicates that only 24% of UK SMEs are actively utilising asset finance to acquire equipment, reflecting a notable gap in adoption despite strong overall awareness of this funding option within the business community. We explore the reasons for this and how businesses can benefit from Asset Finance.

Barriers to Asset Finance Adoption

A March 2025 survey conducted by Time Finance with 500 UK SME decision-makers revealed that although 79% were aware of asset finance, only 24% were making use of it. This underscores a significant disconnect between awareness and actual adoption within the SME community.

High Awareness: The majority of UK SMEs surveyed (79%) reported familiarity with asset finance as a funding solution, indicating that awareness of this financing option is widespread across the business community. This high level of recognition suggests that asset finance has become an established part of the broader funding landscape, with most decision-makers understanding its role in supporting business growth, equipment acquisition, and capital management.

Limited Usage: However, the vast majority of SMEs (76%) reported that they were not actively utilising asset finance in their operations. This indicates that, despite widespread awareness, asset finance solutions remain underutilised by most small and medium-sized enterprises, highlighting a considerable opportunity for bridging the gap between knowledge and practical implementation within the sector.

Adoption Gap: The survey reveals a pronounced disconnect between awareness and the tangible use of asset finance, demonstrating that despite strong recognition of asset finance as a viable funding solution among UK SMEs, a majority have yet to translate this understanding into active participation. This disparity suggests that while asset finance is firmly embedded in the collective consciousness of SME decision-makers, notable obstacles—ranging from perceived complexity and uncertainty about eligibility, to concerns around cost or suitability—continue to deter many from adopting these solutions.

What Tools Are British Businesses Using to Access Working Captial?

Disadvantages of over-reliance on Business Credit Cards

• Debt Accumulation: Without careful management, businesses may find themselves accruing significant balances on their credit cards over time. This can quickly escalate, resulting in mounting debt that places additional pressure on cash flow and overall financial stability.
• High Interest Rates: Maintaining an outstanding balance on a business credit card typically results in substantial interest charges. With rates that are often considerably higher than those attached to other forms of finance, such borrowing can become a costly means of securing working capital if not repaid promptly.
• Fees: Business credit cards often feature a range of fees that can add up, including annual account fees, charges for late or missed payments, and penalties for exceeding established credit limits. The complexity of these fee structures can make it challenging for businesses to accurately assess the total cost of credit card borrowing.
• Impact on Credit Score: Effective credit management is crucial when utilising business credit cards. Missing payments or exceeding limits can lead to negative entries on the business’s credit file, adversely affecting its credit score. This, in turn, can hinder access to more cost-effective financing solutions in the future and may impact relationships with suppliers and lenders.

Disadvantages of Business Overdrafts

• High and Variable Interest Rates: Business overdrafts usually carry interest rates that are significantly higher than those offered by longer-term or asset-backed finance, and these rates are often variable. This introduces a level of unpredictability to borrowing costs, making it challenging for companies to forecast and manage interest expenses effectively, particularly in times of rising rates.
• Repayable on Demand: A key risk associated with overdrafts is their repayable-on-demand nature. Lenders retain the right to demand immediate repayment of the outstanding balance at any time. For businesses, this can pose a substantial threat to liquidity, as being required to settle an overdraft in full without notice may disrupt cash flow and jeopardise ongoing operations.
• Fees: In addition to interest charges, overdrafts frequently attract multiple fees, such as arrangement and facility fees, as well as charges for exceeding agreed limits or for temporary extensions. These additional costs can accumulate, further elevating the total cost of borrowing and eroding margins.
• Negative Impact on Credit Rating: Missing overdraft repayments, breaching agreed terms, or routinely operating at or beyond the facility limit can adversely affect a business’s credit profile. Poor overdraft management is reported to credit reference agencies, potentially limiting future access to funding and increasing the cost of capital.
• Reliance and Overspending: The convenience of overdraft access can lead to habitual borrowing, encouraging businesses to use overdrafts as a default working capital solution. Over-reliance on this form of short-term credit may result in overspending and reduced financial discipline, placing undue pressure on cash flow and potentially masking underlying operational or profitability challenges.
• Limited Borrowing: Overdraft facilities are typically designed for short-term cash flow management and therefore tend to have lower borrowing ceilings than structured business loans or asset finance. This restricts the amount available for larger investments, limiting their usefulness for capital-intensive purchases.
• Provider Limitation: Overdrafts are generally only accessible from the bank holding the business’s primary current account. This can restrict flexibility, as businesses may be unable to secure better terms or higher limits elsewhere without changing banking arrangements.
• Personal Guarantees: Some banks require business owners or directors to provide personal guarantees as a condition of an overdraft. This means that if the business is unable to repay, individuals may become personally responsible, potentially impacting their own credit ratings and exposing them to financial risk.

Asset Finance Amongst British Businesses

How SME’s Can Benefit From Asset Finance

By leveraging asset finance, SMEs can unlock numerous benefits that extend well beyond immediate equipment acquisition. One of the primary advantages is the ability to preserve cash flow—rather than tying up significant capital in outright purchases, businesses can spread the cost of essential assets over a fixed term. This flexible approach aligns repayments with income generation, helping to protect working capital and maintain day-to-day liquidity.

Asset finance also empowers SMEs to access up-to-date equipment and technology without incurring hefty upfront expenditure, supporting competitiveness and operational efficiency. Options such as hire purchase, finance lease, and asset refinancing provide tailored solutions that suit the unique cash flow patterns and asset needs of diverse businesses. Importantly, asset finance arrangements are typically structured against the value of the asset itself, often resulting in more accessible approval terms and competitive rates—especially when working with experienced brokers who can access a broad panel of funders.

Further, asset finance solutions can be adapted to support business expansion, seasonal trading cycles, or specific project requirements—enabling SMEs to invest strategically in new assets as growth opportunities arise. By shifting away from reliance on short-term credit facilities, SMEs reduce exposure to variable interest rates, mitigate the risk of sudden repayment demands, and avoid the cumulative impact of unsecured debt.

Through asset finance, business owners gain the confidence to scale, diversify, or modernise with greater financial predictability and resilience.

If you would like your business to benefit from Asset Finance. please contact a member of our team.