A leading expert on small business financing has said that most small-and medium-sized enterprises (SMEs) would pay less if they applied for unsecured loans rather than using an asset-backed finance product.
Head of Barclays Business, Steve Cooper, said that many SMEs were getting "a bad deal" by using asset-based lending to make acquisitions, generally because the bank would be happy to make the loan even without the security of the asset.
"If someone comes to us and says, 'I want to buy a second-hand vehicle for £15,000', it’s just as easy for me and cheaper for the business to do it with an unsecured loan," Mr Cooper explained. "Whilst I would own the asset I would not rely on it. So why put the business through all that paperwork?"
He made the explanation as the banking giant confirmed the news that it had stopped approving any new asset-based loans to most of the 750,000 small (sales of less than £5 million per annum) businesses it works with.
The decision was made after Barclays concluded that its lease and hire purchase products would require impractical investment to make them comply with new regulations, and that the capital would be better deployed on other small business financing options. 
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