Summer Newsletter
Since our Spring communication the decision has been made to leave the EU and ‘Brexit' is in full flight. Frustratingly, it feels like the UK economy had only just pulled itself out of the more recent financial crisis, only to be thrown into more uncharted waters ahead.
However, although there will undoubtedly be some uncertain times going forward the general consensus from clients and introducers alike is very much business as usual. No one is able to predict the impact ‘Brexit' will have due to the timescales involved with leaving the EU, therefore businesses seem to be bullish in their approach and continue to expand through asset purchases.
In the month of June and July alone we have written over 60 cases across various sectors comprising all sorts of assets, including high performance cars, biomass boilers, machinery, minibuses, cars, light commercial vehicles…the list goes on. This is extremely encouraging given the recent news and discussions with business owners indicate this won’t be slowing down in the short term.
Market News – Finance & Leasing Association
'Asset Finance Sourced through brokers reaches record high in 2015'
In the recent NACFB (National Association of Commercial Finance Brokers) magazine the FLA reported that the asset finance industry, through the provision of leasing and high purchase, has been instrumental in the years since the financial crisis. The sector provided £29bn of new finance to businesses to help them invest in a wide range of equipment. More than £16bn went to support investment by SME’s and overall the industry financed almost 32% of UK investment in machinery and equipment in 2015 – a 7 year high!
'Broker importance’
Brokers played a key role in the asset finance success story. As a route to customers they have grown in importance in recent years. The broker channel recovered quickly from the financial crisis, compared to the major high street banks, with record levels of new business of more than £5bn in 2015.
In a recent Commercial Reporter article they further substantiate the rise of asset finance:
Compared to traditional financing methods, asset finance is bespoke as it is secured by a particular asset, whereas traditional banking is secured by way of personal guarantees.The most common types of asset finance involves leasing or ‘lease-like’ structures, such as hire purchase agreements and operating or finance leases. Asset finance can often work out cheaper than other bank finance because it is secured by a specific asset and, generally speaking, the set up process is relatively straightforward and the credit process is quicker.
Asset finance is not intrinsically complicated and should be kept that way, essentially clients just want to know what they are paying for and how it works. One of the key advantages is that it gives businesses access to necessary equipment without incurring the cash flow disadvantage of an outright purchase. Businesses can also benefit from asset re-finance as it releases tied-up cash, minimises ownership risk, adds to the financial value of business assets and allows flexibility on both the terms and repayment schedule.
Deal Summary
Acoustic Engineering Company investing in new machinery…
Our client, an established leader in its sector, was looking to invest in new machinery from abroad. The nature and structure of the transaction meant it was vital we put in place a totally bespoke facility which not only fulfilled the needs of the client but also the supplier as they needed to receive funds at various points in the shipment and installation process. The facility consisted of the machine funding payable in Euros and also the installation and transportation costs transacted in GBP. In addition our client wanted to release funds in stage payments to the supplier – on order of the machinery, on delivery of the equipment and the final tranche at the point of commissioning.
We discussed this transaction with some of our competitive funders and quickly delivered the bespoke solution to the client. The machinery was delivered and we released two payments, one to the supplier in Euros and one in GBP to the transport and installation team. Our client was very impressed with the flexible and bespoke solution we delivered when the main ‘high street banks’ struggled to get comfortable with the transaction, once again demonstrating our flexibility and expertise in the Asset Finance market.
Logistics & Transport business looking to purchase new vehicle transporters…
As a recently established transport business our client grew exceptionally quickly as more and more contracts were won. The business needed to invest significant sums in transportation vehicles to service new customers – contracts that involved moving several thousand vehicles a week across the UK. With limited trading history but exceptional and profitable contracts going forward, we needed to deliver an asset finance solution for the immediate requirement and also put in place funding to support further investment in the future. We knew no single funder would provide the entire funding solution which was immediate c £500k+ need and therefore we put in place pockets of funding across 10 funders. To date we have satisfied the clients immediate requirements and put in place a funding structure which works in parallel with the clients growth and future funding needs.
Events company increasing its stock of temporary buildings…
Our client, an international events company operating for 100+ years, was looking to ‘refresh’ and update its stock of temporary buildings. Given the nature and materials used in these products funders, would typically see them as ‘high risk and low residual value’ items offering little security. As we have demonstrated repeatedly, our panel of funders have a common sense approach to funding and understood these assets would go out on repeated hire to recognised and prestigious events and therefore the income generated from them was guaranteed. As a result we delivered another bespoke and competitive funding package to one our repeat clients.
As always, thank you for your continued support and we sincerely hope you all have a great summer!