XL Business Finance
Follow us on Facebook Follow us on Twitter Follow us on LinkedIn

Archive for November, 2008

Obtaining asset finance in the credit crunch

Friday, November 28th, 2008

So the banks have been told to start lending money to businesses and individuals to help kick start the economy. The truth is the banks have had their fingers burnt (deservedly so, some may say).

All high street banks and finance companies have tightened their underwriting criteria. Some have withdrawn from certain sectors and some have withdrawn completely. The result is that there seem to me more deals knocking around the broker market as customers are trying to find equipment finance for their acquisitions and investments.

The problem is that the second and third tier funders are awash with more deals than they have ever had. In uncertain times and possibility of a long recession, these second and third tier funders are cherry picking deals. They are concentrating on hard assets with good residual value, strong covenants and a good PG. Their attitude is a ‘take it or leave it’ mentality, as they know the customers have little choice. Interest rates tend to be on the higher side as they know the banks and high street finance companies are not playing ball.

The result is little choice and higher rates. It is now very difficult to organise finance for new start businesses,  high tech equipment and businesses with a poor trading history. The good news is that there are still funders which can cover most eventualities (however there are fewer of them) and a good finance broker has never been able to add as much value.