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Archive for the ‘Asset Finance’ Category

Suppliers Needing Vendor Finance?

Thursday, November 11th, 2010

There are many hire purchase and finance lease companies offering equipment finance. Most will offer their services to vendors and suppliers of equipment. However as a supplier of capital equipment how do you know that you are getting the best possible value for your customers and end users. XL Business Finance has had over 10 years experience in providing funding solutions to end users via vendor finance and supplier arrangements and as such we can certainly add some value and provide some sensible advice.

As with any type of finance different finance companies like different types of kit and operate in different market sectors. It is important that you get the correct sort of funder for your particular business. It is also important that you do not put all your eggs in one basket. A good independent finance broker will have access to various funders that will meet most eventualities. There are a number of big financial institutions that will offer vendor finance arrangement however if a deal doesn’t tick all the oxes then they wont go the extra mile to make the deal happen. Rest assured we pride ourselves on our supplier relationships and will turn every stone in our efforts to obtain finance. In addition we know the the asset lenders inside out and after a brief assessment via companies house and or a chat with the customer we will know exactly which funder to approach and what information will be required. This can save an awful lot of time wasting and effort.

Tags: independent finance broker, vendor finance
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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.

Tags: Asset Finance
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Cash Flow Loans Explained

Monday, November 1st, 2010

A traditional cash flow loan from a banks point of view would be based on the turnover and profitability of a business. Before the recession cash flow loans were a prelevent form of bank lending. They were often used in management buy outs to raise cash to buy the businesses along with other purposes. It was not out of the question to raise funds many times greater than the actual value of the tangible assets of the business.

During a buoyant economy this kind of lending is absolutely fine however as soon as things slow down, as they did recently, serviceability may become an issue and as such the banks find themselves with large loans to businesses with very little or no security. It is no wonder the banks have had such a slating recently for lending on this basis. The recession hits and the banks no longer lend on this basis and are accused of not lending any money. It appears to me that they dammed if they do and dammed if the don’t.

The alternative to cash flow lending is asset based lending whereby a bank or financial institution lend against the asset of the business. These are predominantly invoice finance companies that will lend up to 90% of a businesses debtor book, provide a commercial mortgage, lend approx 50% against any unencumbered machinery and also have the ability to lend against stock and in certain circumstances provide international trade finance.

Whilst a bank has the ability to provide asset based lending they don’t tend to have the expertise as some of the specialist lenders and as such it is often worthwhile speaking to an independent business finance specialist to see what alternatives are available. XL Business has over 10 years experience in helping businesses in this often overcomplicated sector of business finance.

Tags: cash flow loans, invoice finance
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Sourcing Equipment Finance

Thursday, October 21st, 2010

Any business wishing to organise equipment finance for new or used capital purchases may find that the banks not very accommodating at the moment. Any Managing Director or Finance Director may possibly not know who to turn to . It also appears that the choice of finance company appears to be continually diminishing. The good news is that XL Business Finance has the expertise and experience to source hire purchase and finance lease facilities from a variety of lesser know finance house and independent companies.

In addition even if the bank are offering a facility it is advisable to consider an alternative hire purchase or finance lease deal provided by a third party funder. The banks tend to offer funding by way of a commercial loan. As they will probably not secure the loan against the equipment itself they will only lend against the strength of the balance sheet or the amount of available security. This may have implications for raising finance at future dates as valuable funding lines may have been exhausted. Therefore if the equipment to be purchased has some value, it is Durable, Identifiable and Moveable than it maybe possible to organise third party funding

XL Business Finance has many years experience in arranging lease facilities for all kind of things including, computers, printers, office furniture, racking are but to name a few

Tags: equipment finance, finance lease, hire purchase
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Asset Finance in an MBO

Monday, May 24th, 2010

Asset finance can play an important part of the overall consideration in a management buyout. Although it is often the last piece of the jigsaw it can make the difference between making a deal happen and not making a deal happen. Furtherm0re it is imperative that you get a decent asset finance broker to coordinate the best possible deal.

Once upon a time it was very easy to obtain a cash flow loan from a high street bank against the overall facility. A cash flow loan is an amount a bank will advance based on the profitability of a business. Before the credit crunch and the recession these cash flow lends were relatively easy to obtain as the banks were awash with cash and fighting tooth and nail to do deals. How things have changed. An MBO is nowadays funded by the cash within the business ( if there is any), refinancing any property using the debtor book via factoring or invooice discounting and more often than not some deferred consideration.

In terms of the asset finance you will obtain funding from a specialist asst based lender. Refinancing of plant and machinery for such purposes is a very specialist market and it is mot usually provided by the high streets banks and finance companies as they do not have the same expertise. There are currently about half a dozen asset based lenders and they all do things sligtly differently. They all have a niche area and value different types of kit in different sectors slightly differently.

Tags: asset finance broker, refinance existing plant and machinery
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Equipment Finance for a new start business

Wednesday, May 19th, 2010

I suppose it is good news that we are continuing to receive business finance enquiries for new start businesses. The most recent one of which is for a £40,000 LCD exhibition screen. The discussion with the directors prompted me to remind oneself of the process required for funding a new business with very little trading history.

Many businesses that we see that have been trading for less than twelve months have had various experiences with the high street banks. In our experience inexperienced account mangers get the customers jumping through hoops promising that the bank will do the deal only to be overruled when the deal goes for credit approval. In our experience it doesn’t matter how good the business plans are unless three years decent trading figures can be produced then it is unlikely that the banks will help.

The good news is that there a number of leasing and hire purchase companies that will lend to newly formed businesses. Hover in the case of our £40k LCD business any finance company will view this as a soft asset with very little security. Most finance companies will advance up to £10k per decent guarantor providing that the guarantor is a home owner, has a reasonable amount of equity in that house and they must also have a clear personal search profile. There are however one or two companies that may take a view on the overall deal an providing funding for the whole project. If that doesn’t work then we are in the territory of second charges on property!

Tags: business finance, hire purchase
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hire purchase fixed or variable rate?

Saturday, May 15th, 2010

We have come across a very interesting scenario in the last week or so whereby another broker had bee quoting a very very cheap rate on a hire purchase deal. Not wishing to criticise my fellow broking colleagues I suggested to the customer that maybe not all is at it should be.

Most finance companies have the same funding costs and they have the ability to link it to fixed rates or variable rates. At the time of writing this article the cost of fixed funds for most finance companies is around 4.o%. I would suggest that a margin of 2.5-3% would be a fair return giving a nominal rate to the customer of about 6.5-7%. Therefore when a customer was being quoted 5.5% on a hire purchase deal one can only deduce that the broker was about to sign the deal up on a variable rate. Most finance companies on a variable are taking a min base rate of around 3% so this would seem to stack up.

At a time when interest rates are really low it would make sense to go for the slightly more expensive fixed rate because rates are only going to go up but maybe not in the immediate future. At the end of the day it must b the customers choice and as such the customer must be aware as to what he is signing up for. As provision of hire purchase or finance lease to business users is totally unregulated the end user must be aware that even a written quote may not contain this vital information

Tags: finance lease, hire purchase
Posted in Asset Finance, Uncategorized | No Comments »

How to transfer existing leasing agreements in event of an administartion

Wednesday, May 12th, 2010

Love or hate them pe organised administrations or prepacks are an inevitable part of the economy today. In theory they sound great. Dump the old company together with all the old debt ( mainly crown arrears) , buy the business back off the administrator and start a fresh with a new meaner and leaner phoenix company. It has been well documented that obtaining cash flow finance such as factoring or invoice discounting can be relatively straight forward however it may not be so simple in transferring existing hie purchase and leasing facilities from the old co into the new co.

How easy or difficult this may be depends upon the finance company involved and whether it is a finance lease or hire purchase facility. In the event of an administration if the equipment in question is on a hire purchase facility than the administrator has the right to any equity in the agreement and may take this into consideration when negotiating a purchase price for the business. If the agreement is subject to a finance lease then control of the agreement rests with the finance company. In theory the finance company can terminate the agreement, repossess the kit and sell the equipment and pocket any profit. Thankfully this doesn’t happen very often but none the less it is something that could happen.

It would therefore seem allot simpler if the agreements could be transferred or novated into the new co. Unfortunately many of the high street finance companies will not simply transfer the agreement into the new co. They have a policy of not supporting phoenix companies. There are one or two that do but they underwrite the new co as if it were a new deal so there is no guarantee. If they don’t like what they see they will provide a settlement figure and give the business the opportunity to finance the kit elsewhere. Some of the specialist funders do not have an issue in transferring the agreement into a new co. Beware some will transfer the agreement like for like whereas others will charge full outstanding rentals and then roll this into a new co.

Tags: cash flow finance, leasing
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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!

Tags: Asset Finance, hire purchase, leasing
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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

Tags: Asset Finance, refinance existing plant and machinery
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