Fleet News

Funding: Entrepeneurs turn to subprime fleet market

By David Riches, managing director, Ultracar

According to Chancellor George Osborne we have turned a corner in our economic recovery, but the ‘direction of travel’ seems to be following a very different road map.

Last month’s 7.7% drop in unemployment is due to more people having to take part-time work and, as far as jobs for young people are concerned, that particular vehicle seems to have driven into an employment cul-de-sac with a significant increase in those signing on.

But young people are enterprising and, where there are not jobs, many are creating employment opportunities through business start-ups.

But, here once again, they are increasingly meeting an enterprise road block.

This is because banks and other mainstream business lenders will not grant vehicle funding for at least two years – the time it takes to lodge accounts with Companies House – which can put the brakes on expansion for many entrepreneurial companies looking to grow.

‘Bedroom boardrooms’

Independent research revealed that since 2009 when the recession started, nearly 30% of companies were founded by 18-25-year-olds and 22% of them were technology companies – which reflects the landscape of ‘bedroom boardrooms’ that we see.

Many are turning more to subprime vehicle leasing to get their growing workforces mobile because they cannot get credit through conventional lending channels.

We have been receiving more than 60,000 website hits per month – many of them young start-ups looking for alternative credit lines.

We have seen a 40% increase in our subprime fleet business on last year and we are converting 94% of that.

We were previously a conventional vehicle leasing and contract hire business but, with the recession, our emphasis has shifted to 100% subprime where we are averaging 400 visits per day.

We see people from a wide range of backgrounds and circumstances who, for no fault of their own, cannot get credit.

All we need to see is their ability to pay the lease and proof of address which can usually be determined by three months of bank statements.

This applies for most cases even if the start-ups have failed or they have got into other difficulties as a result.

So, there is a message to George Osborne: The UK needs the entrepreneurial spirit and the current credit scoring system is stacked against enterprising young companies – those that are fleet of foot – to help us drive out of recession.

Click here for fleet funding best practice and procurement insight

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