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New Finance company enters Asset Finance Market

Tuesday, November 23rd, 2010

One of the biggest problems a business faces today is the lack of finance companies in the asset finance market. Some of the big high street banks will provide hire purchase and leasing facilities for some of their better customers wishing to purchase capital equipment.  If your bank is unwilling to support or you don’t want to have all your eggs in one basket as far as third party funders there is only one. ING Lease has probably been the only only decent third party funder operating in the asset finance market. Their rates are good however they can only be accessed via the broker network.

After ING  organising funding has been slightly more difficult . Whilst ING are a great funder if for some reason they dont want to play ball the next best alternatives in comparison are far more expensive and onerous in terms of security required. Asset based lenders will only lend a percentage of the forced sale vale and their funding costs all start around 12% nominal. Alternative leasing companies willing to take a view will only lend £10k per director and will always undoubtedly require personal guarantees.

The good news is that there are one or two finance companies entering into the market. Both are pitching themselves not as competition to Ing and your own high street bank but are positioning themselves between these funders and the expensive asset based lenders.

This has been an area in the hire purchase and leasing market where there has been somewhat of a funding gap. Any business that is not quite strong enough for prime rates may have found themselves stuck in the middle of a rock and a hard stone as the kit did not meet the requirements for the pure asset based lenders. Only time will tell as to whether these new funders start to mop up these deals.

Pension Funds and Asset Finance

Monday, November 8th, 2010

As many business owners are aware it is possible to invest in commercial property using a pension fund. The benefits of such a plan have well been documented. However it is also possible to  purchase plant and machinery using asset finance via the pension fund. Whilst on the face of  it , it would appear pointless purchasing a depreciating asset in such a manner there are a number of major advantages  in doing so. Whilst XL Business Finance cannot provide specific advise we were recently involved in such a scenario. Read on!

A major plant hire customer needed some equipment for a new contract. Whilst there was nothing wrong with the credit worthiness of the business we all know that there are few high street funders offering decent rates. Get fully committed with these funders and the second tier can prove very expensive. Organising a loan via the pension fund provided some very very competitive funding indeed.

So what about the tax side of things. Whilst the equipment itself will depreciate over a period , the contract the kit was  being used for would generate a significant amount of income. This income would therefore be paid into the pension fund in a tax effeicient manner. The return on the initial investment was many many times greater than the initial investment and prooved to be some clever tax planning. Whilst this kind of scenario will not work for every business itr is an option that business owners should be aware. XL Business Finance cannot provide specific pension and tax advise however I think this illustrates the concept quite nicely.

Aldermore Bank Plc enters asset finance market

Monday, May 10th, 2010

In the last  month or so a new asset funder has entered the broker market providing a much needed alternative to ING  Lease. Aldermore Bank have entered the  asset finance market as a direct competitor or alternative to ING.

Not that there is anything wrong with ING Lease. Far from it. Over the last 10 years they have been without a doubt the most consistent and effeficient finance provider  in the leasing and asset finance market. However during the last eighteen months  they have been the only serious  funder. Prior to the credit crunch there were at least 4 finance companies that we could have obtained competitive finance and hire purchase facilities. They include Lombard, Barclays, Yorkshire Bank and ING Bank. All were doing extremely competitive deals in order to win your business. However as the credit crunch took hold they all withdrew their leasing facilities and were only doing deals for their very best customers. As such ING has been bursting at the seams and once a customer was at he maximum level with INGthere has been very few alternatives. The only alternative were very expensive second or third tier lenders that without a doubt would have all required guarantees irrelevant as to the quality of the covenant or asset based lenders that are only able to lend against the trade value of the kit.

Therefore having a new prime funder in the market is good news for everyone including ING. Whilst we are not expecting Aldermore to replace ING they will certainly mop up the stronger credits where ING are full. I think it will take some time before they take on the marginal deals but none the less still good news!

Refinance existing plant and machinery and release cash for any purpose

Saturday, May 8th, 2010

It is possible to refinance existing plant and machinery in order to release cash for any purpose ( within reason ) Provided there is equity within your plant and machinery there are a number of finance companies that will advance cash via  a sale and lease back or sale and hire purchase back agreements. And provided your business isnt on the verge of going bust you can release cash for most purposes including providing a deposit for a new machine , paying crown arrears of provided working capital to nge better payment terms with your suppliers

However refinancing existing plant and machinery is a very specialist area which the high street banks and leasing companies have absolute no experience or appetite. There are probably only about half a dozen leasing company in the UK that provide such a facility. As it s a specialist area funding comes at a premium so you can expect to pay slightly higher interest rates than you would get via the bank. However with the banks still being difficult when it comes to obtaining funding asset refinance is a viable option for many businesses. Not all types of assets are suitable security and as such it is worth getting an idea of the value of  your equipment before spending allot of time and effort providing financials etc. The types of equipment and machinery that are suitable are large chunky items such as printing, packaging engineering, commercial vehicles, coaches,  yellow plant  and basically any equipment that has a good residual value in the second hand market. Anything that is bespoke to a business tends to struggle to stack up even though it may have initially cost a considerable amount initially.

XL Business Finance will use over ten years experience to get the best possible valuation for asset refinance. Different finance companies have different areas of expertise and we know which one will provide the best possible values for whatever kit it is that your are looking to release cash against

A guide to financing new equipment and machinery purchases

Wednesday, April 28th, 2010

At a time when many of the high street banks and finance companies are still difficult to deal with it is imperative than any application for hire purchase or leasing facilities to the few remaining finance companies are presented in the best possible format. At XL Business finance we have over ten years of experience and expertese in organising competitive finance facilities for a variety of businesses. The following will give you an idea of the type of information that we will collate and present to the finance company.

 

1. We will require the last full set of audited accounts. We will need every single page and not just the most recent profit and loss and balance sheet.

2. We will require the most recent set of management accounts . If there has been more than twelve months since the last set of full audited accounts we will require management accounts  to the next full year and also the most recent set thereafter. As a minimum we will require a profit and loss and balance sheet. Any finance company will require the most up to date information that is available to ensure that the performance of the business is adequate for their requirements.

3. No matter how big the deal is three months bank statements will help to evidence serviceability. If three months clean bank statements can be provided then this is always be a massive positive in term of evidencing serviceability.

4. Confirmation of working capital facilities will also be useful. A copy of the bank overdraft or factoring facility letter is also a good idea to include

5. Background information will enable the underwriter to understand where the business has come from and the future plans

6. An aged debtor report will evidence the quality of your customer base

7. Most importantly we will need to provide a rational for the purchase. Is the kit replacing old kit? Will turnover increase, labour savings be made  or margins increase. It is always useful to know of any existing finance agreements coming to their end which again will evidence serviceability

8. Are personal guarantees available if any

9. Is there any other security available such as unencumbered kit or property which may help to increase security levels?

Why should you use an asset finance broker

Friday, April 23rd, 2010

To ensure that you get the best possible deal when financing your capital equipment you should use a well established and reputable asset finance broker that has been around the block a few times and knows and understands the leasing and hire purchase market. Beware of the retired  or recently made redundant bank manager as they have absolutely no idea what is available or achievable in the asset finance market. As one of the countries leading asset finance introduces we know exactly which finance companies finance what sort of assets for what sort of businesses.

Whether it is a £1.0m   refinancing of existing plant and machinery or purchasing a £5k multi function copier XL Business Finance has numerous funders with cash wanting to do deals. These might not always been well known high street funders however there are still finance companies in the market today wanting to deals. As with any sort of finance they all have their sweet spots and they expect any proposals to be put them in a way that makes them easy to understand. It maybe also that they don’t need as much info as you would normally expet a bank to require. We can certainly get a handle as to what is achievable very quickly indeed without the need for expensive business plans and projections. Allot of the time it comes down to the sort of asset and what other security is available.

And remember that finance is a risk reward business so if your business has been trading for less than three years , has an insolvent balance sheet or has shad a difficult period of trading don’t expect bank rates!

Asset Finance in an MBO

Monday, March 1st, 2010

Amongst all the turmoil of the last eighteen months we are still seeing one or two opportunities to fund management buyouts.  This makes a change from the business going bust and new directors and shareholders  buying  the business off the administrator. In terms of providing funding there are fewer options than there were before the credit crunch however asset finance is becoming more and more prominent as a option to top up other types of funding.

Once upon a time you could go to many high street business banks and obtain a cash flow lend against the turnover and the profitability of the business. The amount that could be borrowed bore no resemblance to the individual assets of the business, mainly buildings , debtor book and plant and machinery. It was once possible to obtain funding much higher than the total worth of all these assets. These sorts of loans are virtually impossible to come by nowadays because many of the banks have had their fingers burnt as business have failed during the recession leaving the banks highly exposed.

Nowadays it would appear that traditional asset based lending would be the way forward. A commercial mortgage, factoring and invoice discounting and a bit of asset refinance to top up the facilities. If the vendor requires any more cash than it is usually done by way of deferredpayments. However asset finance and asset refinance is playing a more and more important part of the MBO process. It is important that an asset finance specialist can provide the best possible options for refinancing your kit. There are various finance companies that specialise in engineering , printing and commercial vehicles and they use their own experiences and supplier network to value equipment . There are also a number of general funders that use professional valuers to obtain valuations for refinancing purposes. At XL Business Finance we use our knowledge and experience to make sure the best possible option is provided for your business.

Arranging Lease finance

Saturday, January 23rd, 2010

Arranging lease finance or asset finance is still increasingly difficult to obtain. The market for prime lending has changed considerably over the last eighteen months as the high street lenders are still taking a precautionary approach to lending. Before the credit crunch and the recession most of the high street banks had an asset finance division in addition to the core commercial banking. As the banks started to suffer losses and the availability of cash to the bank themselves began to dry up these asset finance divisions started to wind down these operations.

 From an independent brokers  point of view, before the recession most of the asset finance divisions would all take broker business. There was Lombard,  Bank of Scotland  , Yorkshire Bank and Barclays to name a few. Whereas now the banks are tending to look after their own customers and wont accept broker introduced  business. Therefore if you go to your own bank and perhaps you are not strong enough to get approval there are few high street options available. In addition some high street banks wont offer hire purchase or finance lease facilities less than £50k. HSBC is a prime example. They might agree a facility for you however it will be done a straight forward commercial loan which means taht if you go back to your bank for some further funding you risk the possibility of not being able to get further funding.

 The good news is that there are still one or two finance companies that deal exclusively with the broker market that are willing to take 3rd party business. XL Business Finance has had over ten years experience of helping such businesses. Credit is still tight to come by and as such we can add value to your business because we know exactly how to structure a deal for a finance company in order to get the best possible chance of approval. Believe you me it is worth the effort because the next tier of funders are extremely expensive!

Need to arrange equipment finance?

Friday, January 8th, 2010

There are two very  different types of finance companies when it comes to arrange equipment or asset finance. There are balance sheet lenders and there are asset lenders. They approach things in completely different ways.

 Balance sheet lenders are typically your banks and high street finance companies. They are more interested in how long a business has been trading, how strong the balance sheet is, how profitable a business is and without a doubt you must be able to evidence serviceability. They are looking for businesses trading f0r more than 3 years without any blemishes on their trading history. If there are any county court judgements finance will tend to be declined. If your investment is £100k for example they will expect to see a net worth of at least that amount.  If your business is strong enough for balance sheet lending you can expect to obtain very favourable interest rates and excellent terms for hire purchase and finance lease transactions.

The problem is that the high street lenders are being very picky about who they will lend money to. A business which could have obtained funding from a bank 18 months ago may find that they are given the cold shoulder at the moment. It is a combination of banks tightening up their underwriting criteria combined with a lack of cash in the market which has caused basic economics of supply and demand to kick in.

The alternative are the asset lenders. These finance companies are specialist finance companies that will value equipment and lend a percentage of their perceived forced sale value. Therefore a new machine costing £100k may only have a day one forced sale value of £60k which might mean they will only advance £50k against that piece of equipment. The remaining deposit would therefore need to be found by using additional equipment to provide a more secure transaction. XL Business Finance has been providing funding solutions for over 10 years.

Asset Finance leasing for a new start business

Sunday, December 13th, 2009

Arranging any kind of asset finance for a new start business can be a daunting task. It can even more difficult in the current economic climate.  With very few leasing companies lending money and the ones that are left lending money can be most difficult to deal with. They are only lending money on their terms and don’t expect to be paying any cheap interest rates. The good news is that arranging hire purchase and finance lease facilities can be relatively straight forward in terms of information require by the leasing companies. We will not require elaborate business plans and cash flow projections

 At XL Business Finance we have many years of arranging asset finance for our clients. Many suppliers and introducers come back to us because of our ability to arrange funding at the most competitive rates for long established and profitable companies. In addition they know that as an independent finance company we can quickly determine whether a potential new start business will be eligible for finance.

Without doubt we will be able to let you know in a five minute conversation as to whether you will be eligible or not. First with out a doubt you must be a home owner. The finance company don’t necessarily require a charge over your property. It is just that if you screw up you are more likely to do a runner if you are a tenant. If you are setting up a limited company then it is a non starter if you don’t want to provide a personal guarantee.  If you are a home owner with plenty of equity in your personal property you are a far better risk. Also if you have any adverse personal credit information then it also becomes more difficult. It is imperative that if you are thinking of starting a new business don’t take your eye of your personal finances.

If you are also looking to take advantage of invoice finance such as factoring or invoice discounting this approach will also help you in your entrepreneurial adventure.

 
 
 

XL Business Finance Ltd is a privately owned and independent business financing company with established links to many of the UK's leading finance houses. XL Business Finance provides a viable alternative to high street banks that lack the flexibility and imagination to provide a solution to most business users requirements. XL Business Finance can provide a full range of business financing solutions and we ensure a high level of customer service and pride ourselves on quick decisions. Our independent status will ensure any offer of funding and asset finance leasing is best suited to our customer’s needs.

XL Business Finance, Eaton Place Business Centre, 114 Washway Road, Sale, Cheshire M33 7RF UK.

 

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