UK independent IT finance provider Syscap is calling on the Conservative-Liberal Democrat government to include leasing as part of its plans to introduce a major new loan guarantee scheme to small and medium enterprises (SMEs).

The previous Labour government’s flagship Enterprise Finance Guarantee (EFG) scheme excluded leasing from the forms of finance it was prepared to guarantee, and according to Syscap, this exclusion partly contributed to a drop in business investment. Figures released by the UK’s Finance and Leasing Association (FLA) reveal that the amount of business finance made available to British businesses was £4.1bn in the first quarter of 2010, down 25% from the year-ago period.

Philip White, chief executive of Syscap, said: “Because the vast majority of SMEs choose to fund capital investment through leasing, the previous government’s decision to exclude leasing from a loan guarantee scheme was a mistake. It is something the new coalition should quickly rectify. For SMEs without huge capital reserves lease finance is the most attractive funding option available, so if we are going to see an upgrade to the EFG scheme then surely leasing should be included?”

Syscap is also calling on the new coalition government to clarify whether or not they plan to pare back capital allowances. According to White, reducing them could jeopardise the ability of businesses to secure capital investment.

“The lack of real detail in the coalition document on capital allowances is cause for concern for UK businesses.” he said. “We are not out of the economic woods yet, and whilst we are told that manufacturing industries will be protected, many worry that when governments start talking about ‘simplifying’ taxes, someone is going to lose out. Reducing capital allowances to fund a cut in corporation tax could amount to robbing Peter to pay Paul. The removal of capital allowances will disincentivise people from investing in business assets. This investment is vital for the economic recovery.”

Syscap is one of several organisations which have urged the new coalition government to set out or clarify various aspects of tax or regulatory law as they relate to the UK leasing and asset finance sectors. Earlier this week, ACFO, the UK non-profit industry body representing fleet vehicle businesses, called for talks with the government in a bid to to ensure that future tax changes take account of the availability of low and zero emission vehicles.

Article contributed by Asset Finance International