Businesses prefer leasing to loans when buying IT

Leasing has overtaken traditional bank borrowing as a way of financing technology investments among medium-sized European businesses, a survey claims.

Companies are turning their back on standard bank credit because lenders have been tightening their credit policies in recent years, and are instead turning to leasing, according to a survey of European finance executives by Siemens Financial Services.

The pace of technology change means organisations are now less interested in the ownership of IT assets such as PCs and servers, it said.

Forty-three per cent of UK companies surveyed use leasing to finance IT purchases, compared to 20 per cent which use loans. However, three-quarters still pay for IT assets in cash.

Leasing payment schedules are fixed for the full term of the contract, allowing companies to eliminate the risk of interest rate changes, the survey revealed.

Kari Kupila, head of equipment and sales financing at Siemens Financial Services, said: "This is symptomatic of a broader swing away from plain bank borrowing and towards alternative financing. The fixed cost dependability and tax advantages of leasing have evidently put it in pole position to absorb a significant proportion of this swing."

The company interviewed 400 financial directors for the study, from France, Germany, the UK and the US (100 per country).