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Declined Finance?

In my opinion leasing comapanies are continuuing to tighten their underwriting criteria. Every week we receive an email from a finance company saying they have pulled out of financing this sort of equipment or don’t want to finance businesses in that industry sector. Providing you have been trading for more than 3 years, you have a very strong balance sheet, you are very profitable and your accounting information is bang up to date you should have no problem obtaing a hire purchase facility or a finance lease facility, however it is no guarantee. Leasing companies are  paying particular attention to sercieability so it is now necessary to provide 3 months recent bank statements as part of the underwriting process. If you are one of the lucky ones you will get a nice interest rate and nice terms. This is good old balance sheet lending. Happy days!

Unfortunately there seems to be more bussinesses struggling to obtain finance than businesses getting clean acceptances. Until recently here were a handfull of funders that positioned themslves just below the high street funders taking a commercial view on the deals that did not appeal to these high street lenders.

The bad news is that the near prime funders have nearly all disappeared due to their inability to obtain funding themselves on the wholesale market. The asset based lenders will do deals however they nearlly all want to be asset secure. Therefore if you are buying a piece of kit costing £250k and they perceive the forced sale value at £125k they will require an additional £125k worth of  security. This can be in the form of unencumbered kit or can be equity in commercial or residential property. It may even be possible to refinance equipment and machinery coming to the end of a lease or hire purchase agrement.

If no addional security is available many businesses are finding themselves caught between a rock and a hard stone.

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