The finance reflex that’s failing SMEs

Imagine this: an SME urgently needs new equipment to fulfil a growing order. Cash reserves are tight. What do they do? According to the New Lease of Life report, the most common answer isn’t leasing. It’s a business loan. In fact, 40% of SMEs would default to a loan, while just 13% would choose leasing.

On the surface, this might seem logical. Loans are familiar. They feel like a tried-and-tested route. But that familiarity is misleading. For many SMEs, loans are not just inefficient — they’re actively counterproductive.

 

Mismatch in motion: Loans vs. equipment needs

Let’s be clear: loans can be powerful tools for certain types of growth. But they’re the wrong tool for short-life, fast-moving or depreciating assets.

When SMEs use loans to buy equipment outright, they:

  • Drain capital upfront that could be used to grow the business
  • Lock themselves into rigid repayment schedules
  • Own assets that start losing value the moment they arrive
  • Create pressure to “sweat” old equipment far beyond its optimal life

 

Meanwhile, leasing gives businesses access to the assets they need now — without tying up capital or locking them into outdated equipment.

 

It’s not about access. It’s about assumptions.

SMEs aren’t reaching for loans because leasing isn’t available. They’re doing it because of deep-rooted assumptions:

  • “Leasing is more expensive in the long run”
  • “Owning gives us more control”
  • “We’ll look at leasing when cash is really tight”

 

These aren’t facts. They’re myths. And they’re costing SMEs flexibility, innovation, and cashflow headroom at a time when agility has never mattered more.

 

Loans are static. Business isn’t.

Today’s SMEs face relentless change: market shifts, supply chain shocks, tech revolutions. A loan is a static solution in a dynamic world.

Leasing, on the other hand, flexes with the business. It enables:

  • Quick equipment upgrades
  • Smarter, predictable cost planning
  • Faster time-to-value on new investments

 

And here’s the kicker: 70% of SMEs in the report agree leasing would help them unlock growth. The appetite is there — but the mindset needs to catch up.

 

What this means for UK SMEs

Every time an SME chooses a loan over leasing for their equipment needs, they may be unintentionally:

  • Creating a future cashflow crunch
  • Delaying access to better, more efficient tools
  • Reducing their ability to scale quickly

 

The opportunity cost is real — and largely invisible until it’s too late.

 

A new question to ask

Instead of defaulting to “How do we afford to own this?” SMEs should be asking:

  • “How do we access what we need, when we need it?”
  • “How can we keep cash flowing while keeping our kit cutting-edge?”
  • “Are we financing for ownership or for outcomes?”

 

The smart money is rethinking finance

SMEs that embrace leasing aren’t just making a financial decision. They’re making a strategic one. One that prioritises access, agility, and innovation over nostalgia and rigidity.

The New Lease of Life report makes it clear: leasing is no longer an alternative. It’s an advantage. And the smartest SMEs aren’t waiting to be convinced.

They’re already moving.