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Asset finance lending sees 9.7% annual increase

New lending via asset financing has increased by 9.7% annually, totalling £31bn, with the service and construction industries driving this growth to the greatest extent.

Sirius Property Finance analysed total asset finance lending, the industry sectors utilising it to the greatest extent, as well as the most common assets financed.

Asset finance allows businesses to grow by removing the high upfront cost of acquiring much needed operational equipment, instead allowing them to pay an agreed amount over a period of time.

There is no need for the company to provide additional collateral as the asset itself is the collateral, with the asset finance provider also often responsible for the maintenance of the asset and its replacement if faulty, as well as any depreciation in its value.

Asset finance is a popular choice for many businesses as it is often cheaper than other forms of financing although it can come with restrictions such as limits on the use of the equipment, mileage for example, while most financing is also often short-term.

The analysis by Sirius Property Finance shows that last year, commercial vehicles were the most common asset acquired by UK businesses, accounting for 29% of new lending, followed by company cars (27%) and plant and machinery equipment (23%).

Asset finance as an option to drive business growth is increasing in popularity. The latest figures show that in 2022, there was £34bn in new lending, a 9.7% increase on the previous year.

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The services sector was the driving force behind this uptick, accounting for 65% of total new lending last year, with the construction sector accounting for the second largest proportion at 10%. The agricultural and manufacturing sectors also accounted for a sizable amount of activity, accounting for 8% of total lending a piece.

Managing director of Sirius Property Finance, Nicholas Christofi, commented: “Asset financing is a great way to support company growth without the need of an outright cash lump payment. Whether it’s the lease of equipment, a finance lease, an operating lease or contract hire, there are numerous ways asset financing can help a business to expand and it’s a more versatile and often more cost effective route when compared to other financing options.

“In the current economic climate it’s also growing in popularity, allowing many businesses to plan for the future at a time when they may not have the disposable income to do so. This means that when the economic picture does start to brighten, they are poised to hit the ground running, rather than playing catch up with their competitors.”

By Rozi Jones

Source: Financial Reporter

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Discover how asset-based lending could transform your business

These are challenging times for businesses in Scotland. The effects of high inflation, supply chain disruption, and increasing energy prices are all leading SMEs to turn to more flexible forms of finance.

Lenders can play their part and offer tailored solutions to support SMEs trying to thrive in difficult conditions. In response to this, Shawbrook has enhanced its asset-based lending offering*, simplifying the onboarding process to give businesses another option during complex times.

What is asset-based lending?

Asset-based lending (ABL) is a form of business financing that enables a business to secure a loan by offering its assets as collateral. Assets often include inventory, machinery and equipment, as well as real estate or debt owed to the business. By leveraging the value of these assets, businesses can access capital to manage cash flow, fund expansion, or seize growth opportunities.

Historically, securing an ABL facility was complex and time-consuming, with businesses needing documentation for each asset class they leverage. This made ABL a complicated financing solution, typically used as a last resort or where businesses have poor credit histories.

ABL for the modern-day

At Shawbrook, we feel that ABL can be versatile and enable businesses to unlock substantial value tied up in both paper and physical assets, providing the financial headroom to support pivotal events such as acquisitions, management buy-outs, and other grown plans.

Recognising this, we streamlined our ABL offering so businesses could leverage multiple asset classes within one straightforward piece of documentation. We removed the cap on the collateral mix that businesses employ for funding leverage, with every deal judged on a case-by-case basis. These changes greatly improve the speed of the onboarding process and make the facility significantly easier to manage over its lifetime.

This enhanced ABL proposition can also be integrated with other financing facilities to deliver a bespoke hybrid lending experience. This enables clients to gain access to a highly versatile product and adapt to changing circumstances in real time.

Discover our Asset Finance Broker services.

How an ABL loan transformed Genius Food Limited’s facilities

Utilising Shawbrook’s enhanced ABL solution, an Edinburgh-based food manufacturer quickly secured funds against its business assets to support further growth.

A specialist in manufacturing gluten-free goods which are distributed worldwide, Genius Foods approached Shawbrook to refinance an existing invoice finance line and raise funds to improve production lines at its Bathgate facility. Previously, securing funding on these terms would be painfully time-consuming and complex, resulting in heaps of paperwork.

Using the firm’s invoices as collateral, Shawbrook rapidly assembled a £7.5m asset-based lending package for Genius, incorporating a financing line, a property loan and a cashflow loan, on a 25-year amortised repayment profile.

The terms agreed demonstrate the flexibility and value of ABL in preserving cashflow whilst meeting a multitude of different needs for a client.

The package enabled Genius to leverage its assets to generate the cash needed to continue providing high-quality goods to market and refinance its original invoice finance line, all within one facility that delivers efficiency and is easy to manage.

By Leena Sidat

Source: Insider

asset finance
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Asset finance new business grew by 13% in May 2023

New figures released by the Finance & Leasing Association (FLA) show that total asset finance new business (primarily leasing and hire purchase) grew in May 2023 by 13% compared with the same month in 2022. In the five months to May 2023, new business was also 13% higher than in the same period in 2022.

The business new car finance and commercial vehicle finance sectors reported new business up in May by 60% and 7% respectively, compared with the same month in 2022. The plant and machinery finance sector reported a fall in new business of 10% over the same period.

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Commenting on the figures, Geraldine Kilkelly, Director of Research and Chief Economist at the FLA, said: “The asset finance market reported a thirteenth consecutive month of growth in May as the trends of higher average advances across asset finance sectors and strong performances by the vehicle finance sectors continued. Lending to larger businesses was up by a third in May, and to SMEs grew by 4% in line with the previous month.

“The industry is also cautiously optimistic about prospects for future growth, with the FLA’s Q2 2023 Industry Outlook Survey showing that almost three-quarters of asset finance respondents anticipate some increase in new business over the next year.”

By Lisa Laverick

Source: Asset Finance International

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SMEs extend machinery asset life as supply chain issues hit

SMEs have been forced to extend the life of their existing assets as global supply chain issues reduce the availability of new assets, Paragon Bank research has found.

Paragon’s survey of over 500 businesses, conducted on behalf of the bank by Opinium, found that nearly a third of SMEs (30%) had operated existing machinery longer than planned in the past 12 months, with 29% acquiring pre-owned machinery due to the unavailability of new assets.

A fifth of companies reported that they had refinanced an existing machinery asset.

A similar story was reported with commercial vehicles, with 34% of SMEs running these for longer than planned and 20% acquiring pre-owned equipment.

The problem with the supply of new assets forms part of a wider issue SMEs face with the broader supply chain, with companies reporting a deterioration across several areas of supply.

The main issues businesses faced were in the cost and availability of goods – 43% of SMEs said the cost of goods and services had worsened in the previous three months, versus 23% that said it had improved. Meanwhile, a third (32%) of companies reported the availability of goods and services had worsened, against 26% that recorded an improvement.

SMEs also recorded a deterioration in the reliability of suppliers (32% worsened/24% improved) and the financial stability of suppliers (26% worsened/23% improved).

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Improvements were seen in the areas of ESG practices, with 26% of firms reporting that supplier performance had improved against 14% that recorded a downturn, and suppliers hitting service level agreements (23% improved/20% worsened).

John Phillipou (pictured), Paragon Bank SME Lending Managing Director, said: “Supply chains were significantly disrupted by the Covid pandemic and are only just getting back on their feet today. Up until recently, it was near impossible for SMEs to secure the new assets they required, so they have been forced to use existing assets for longer and to refinance them to support cashflow. We have certainly seen a strong increase in lending against refinanced assets.”

He added: “More broadly, companies have experienced disruption in their supply chains, particularly in areas such as the availability and cost of goods. We would expect to see these pressures ease as inflation comes down and global supply chains return to more normal conditions.”

By Lisa Laverick

Source: Asset Finance International

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Asset finance new business grew by 12% in April 2023

New figures released by the Finance & Leasing Association (FLA) show that total asset finance new business (primarily leasing and hire purchase) grew in April 2023 by 12% compared with the same month in 2022. In the first four months of 2023, new business was 13% higher than in the same period in 2022.

The business new car finance and business equipment finance sectors reported new business up in April by 48% and 13% respectively, compared with the same month in 2022. The commercial vehicle finance and plant and machinery finance sectors reported falls in new business of 2% and 6% respectively, over the same period.

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Commenting on the figures, Geraldine Kilkelly, Director of Research and Chief Economist at the FLA, said: “The asset finance market reported a year of sustained monthly new business growth in April supported by continued strong growth in the business new car finance sector. Annual new business in April at £35.3 billion was only 1% lower than the pre-pandemic peak in 2019.

“Asset finance supports business investment across all major industry sectors and business size. New business provided to larger businesses grew by 27% in April, to the manufacturing sector increased by 30%, and to the services sector grew by 11%, compared with April 2022.”

By Lisa Laverick

Source: Asset Finance International

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Brokers poised for success in 2023, finds Time Finance roundtable

Market resilience and optimism continue to boost confidence amongst brokers and fuel plans for growth, finds Time Finance.

In a recent industry roundtable, the alternative finance provider invited a panel of leading Asset Finance brokers from across the country to discuss market predictions for 2023 and plans to assist recovery and growth of the UK SME market.

The conversation covered the vital role of technology and data, the specific training required to support the next generation of brokers and confidence for the year ahead.

The overriding outcome uncovered universal optimism from brokers as they told Time Finance of plans to expand their workforce and increase their headcount to keep up with the growing demand for finance from businesses. Upskilling existing employees through bespoke training packages and funder-led broker academies was deemed to be a key priority for the year ahead.

Discover our Asset Finance Broker services.

Across the board, investment plans were fuelled by a confidence in the recovery and strength of small-medium business community, who make up 99% of the UK economy. This included bringing in new systems, processes, and technology to quicken funding decisions and adopting a data-led strategy to uncover emerging trends and identify opportunities to offer additional support for clients.

Steve Nichols (pictured), Director Asset Finance at Time Finance, said: “We’re encouraged by the resilience and adaptability of the broker market as they set wheels in motion to invest, grow and bolster their support for SMEs in 2023.

“In the wake of rising costs, supply chain disruption and many other cashflow challenges hampering businesses right now, our roundtable comes at a crucial time and shines a light on the importance of helping businesses feel confident about their future. It’s fantastic to see such a remarkable ability from our brokers to pivot, adapt and innovate, which will only help to poise brokers and our collective clients for success in 2023.”

Amongst the attendees were Tom Roberts from Moorgate Finance, Carl Johnson from Anglo Scottish, George Parker from Halo Finance, Jack Smith from Love Finance, Ryan Williams from Victor Finance, Tom Perkins from Charles & Dean, and Rob Dermody from PMD Business Finance.

Steve added: “We look forward to hosting many more roundtables and continuing to bring together our valued broker network to discuss the future of finance for SMEs and how best we can support their ever-changing needs. And, as we continue to invest in our own offering and increase our support for SMEs, we too remain optimistic about the opportunities that lie ahead.”

By Lisa Laverick

Source: Asset Finance International

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Asset-based funding is vital route for many businesses

Asset Based Lending (“ABL”) remains an important route to funding for many retailers, wholesalers and manufacturing small to medium enterprise (“SME”) businesses in particular; and will continue to be a key access to funds both in its current guise and in future form as funding and security pools change. ABL remains the most fluid and flexible form of security with SMEs reliant on floating charge lending incorporating inventory revolving facilities along with the primary invoice finance form of ABL supported by additional plant and machinery and property term loan facilities.

Investors use ABL to support acquisitions, as do MBO/MBIs deals, both of which have maintained traction amid economic and market uncertainty. Brexit has presented many challenges for UK businesses reliant on or exposed to Europe with some stockpiling due to the unknown, tariffs and variable trade restrictions that may well be implemented, which can prove to be an issue when cashflow is tight. Purchasing in advance leads to reduced cash availability in order to thrive withadded costs hindering a business. ABL eases cashflow issues and concerns via fixed and floating charge facilities.

ABL enables business to raise higher levels of funding to facilitate strategic plans or simply release additional working capital. ABL can offer higher levels of funding than invoice finance alone and release working capital against inventory, plant and machinery and property as noted. ABL is a bespoke solution, designed around a borrower’s specific requirements. For businesses with proof of strong cash generation in the past and positive cash forecast for the future, cash flow loans may also be available to further top up funding lines where appropriate.

Further risks loom with UK ABL under threat from the 2020 Crown Preference plans with proposals for the crown to be preferential in respect of floating charge lending that would likely impact inventory in particular. Undoing the Enterprise Act effectively leads to the crown once more ‘jumping the queue’. Lenders secured on an inventory floating charge may well be exposed and under collateralised in an insolvency. Crown liabilities need to be up to date to mitigate exposure and risk. Should proposals be approved; and there continues to be a great deal of opposition, floating charge lending could be as risky as unsecured lending. The UK needs reliable access to ABL funds to operate; and putting floating charges at risk may restrict access to flexible funding in the future, which will only be detrimental to HMRC in the long term.

We are perfectly positioned to support lenders and SMEs through the challenges and risks ahead offering advice and due diligence to assess the exposure and options to mitigate the risk. We provide independent and specialist all asset class valuations and sector guidance relating to inventory floating charge and receivable fixed charge facilities, along with plant and machinery and property term loans.

Source: The Business Desk

finance lending
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Asset Finance Guide for Suppliers: Make Life Easier for You & Your Customers with the Right Asset Finance Solution

Asset finance is a vital finance tool for businesses that can’t afford to invest upfront in essential equipment and machinery. If you are a supplier, offering the right asset finance solution can help you onboard a significantly higher number of customers.

Keeping aside all the business and marketing jargon like ‘cutting-edge’ and ‘state-of-the-art’, it shouldn’t be too hard to see why businesses are constantly in a need to buy or lease newer, better, more efficient equipment, machinery and even software.

This need typically stems from two reasons:

  1. To stay relevant. When all your competitors are moving ahead of the curve, you are forced to take desperate measures to catch up. This isn’t an ideal way to look at things from the business perspective, but it is the cold, harsh reality. We can go so far as to say that many businesses find themselves going for newer assets that they wouldn’t really need if it weren’t for the competition.
  2. To add to the top line. In other cases, buying or leasing assets is a genuine need to maintain, sustain and improve operations. Businesses estimate that the costs of onboarding an asset will compensate themselves through better performance, productivity and/or efficiency, adding more strength to their top line.

Regardless of the reasons, the only thing suppliers need to know and understand that there is and will always be a steady demand for assets (so long as your business is on the right side of technology, trends and market forces). Despite this factor being in their favour, many suppliers and vendors end up performing poorly – thanks in no small part to their inability to look after customers’ needs.

Asset finance solves this problem.

What Is Asset Finance?

Every business knows this very well – it’s much easier to finance products and services than getting cash loans.

This applies even more strongly to small partnerships and sole traders. Getting a personal loan from a high-street lender and diverting the funds towards buying or leasing an equipment they sorely need is a tough task. It not only puts their personal credit on the line, it also means that they end up closing doors on their business should the need to borrow more arise in future.

So, quite predictably, it’s very common to see businesses that are stuck between the proverbial rock and a hard place – the need to have an asset on board and the inability to pay for it.

As a supplier or vendor, this doesn’t bode well for you. You can’t just turn down prospects after prospects just because there’s no workable financing solution to make the transaction happen.

“Even though it’s true that SME loan acceptance rates are promising, businesses will take every opportunity to spread their purchases without touching the cashflow. If you offer your customers a customised asset finance solution through a reliable, market-leading broker like Commercial Finance Network, you can bring down the biggest conversion and sales barrier for your business.”

How Does Asset Finance Help Your Customers?

Before understanding how asset finance helps suppliers and vendors, let’s quickly take a look at why it is so popular among businesses (your customers).

It’s Easy.

It’s much easier for businesses to secure asset finance than getting a business loan. Asset finance is usually tied to the asset being bought or leased, and, in a way, is secured. This allows lenders to be more lenient while assessing asset finance applications.

It’s Flexible.

Asset finance is among the most flexible commercial finance solutions out there. Depending upon the type of asset finance chosen, the borrower can choose the interest-only model or the flexible monthly instalment model for repayment. While leasing the asset, there are usually little to no upfront costs involved for the lessee.

Commercial Finance Network offers some of the most flexible asset finance partnerships to suppliers and vendors. Based on the nature of the asset and the requirements of the borrower, we may be able to extend partial or full finance, customised repayment schedules (including a possibility to introduce repayment holidays) and some of the lowest interest rates going around.

It Makes More Sense.

By not paying the cost of the equipment or machinery (or any other asset, for that matter), the borrower can make sure that their cashflow isn’t hurt. They get to enjoy the benefits of having the asset on board without sacrificing their working capital – a win-win on most counts.

It’s Cheaper.

Buying or leasing assets, in most cases, is tax deductible for businesses. Through Annual Investment Allowance (AIA), businesses can claim tax relief to the tune of qualifying asset expenditure, adding a huge incentive for asset acquisition.

The good news is, the HMRC has temporarily increased the AIA limit from £200,000 to £1,000,000 for two accounting years (starting 01/01/2019).

Find out here if your customers can claim AIA for the assets on your inventory.

How Does Asset Finance Help You, As a Supplier/Vendor?

Being a supplier or a vendor means that you get to work with a variety of businesses. Let’s just assume that you turn down a significant fraction of leads because there is no feasible financing solution available for the customer to finalise the agreement.

In that case, the easiest way to calculate the impact of an asset finance partnership on your bottom line is this:

Let’s say you generate a net profit of £5,000 per sale and £900 per lease.

You generate 2,000 leads per month, with a conversion rate of 1% (in sales) and 1% (in leases). That means you generate profits to the tune of £118,000 per month. If you turn down 0.1% of leads just because the customer isn’t able to secure a good asset finance package, that adds up to £11,800 per month in lost profits!

By forming a no-obligations partnership with a responsible, industry-leading whole of market broker like Commercial Finance Network, you can boost your sales significantly, without incurring any charges. To know more or to request a call back from our asset finance experts, please get in touch with us.

Here are other reasons for suppliers and vendors to offer asset finance to their customers:

It Frees Up Your Money

If you are a supplier, here’s what a typical cash cycle may look like for you:

  1. You purchase an asset from the vendor (day 0).
  2. You pay the vendor within two weeks (money out by day 30, you’re cashflow negative with an asset on your books).
  3. The customer agrees to purchase the asset from you on day 40. The asset is immediately moved off your books.
  4. You’ll still be cashflow negative for the next 30 days.
  5. On day 70, you finally receive the payment for the asset. You book profits and you’re cashflow positive.

Alternative, if your customer had an asset finance solution to facilitate the transaction, this is what happens:

  1. You purchase an asset from the vendor (day 0).
  2. You pay the vendor within two weeks (money out by day 30, you’re cashflow negative with an asset on your books).
  3. The customer agrees to purchase the asset from you on day 40. The asset is immediately moved off your books.
  4. The transaction is complete within 2-5 days.
  5. You book the profits no later than day 45. You’re cashflow-positive.

So, essentially, asset finance significantly improves your cashflow cycle in your favour (from 70 days to 45 days, in this case).

It Removes the Most Common Conversion Barrier.

Investing heavily in an asset is never an easy decision for your customers – especially if they are small businesses.

You can be sure that they are looking around for better deals even when the negotiations are on with you. In such cases, if they can get an affordable asset finance quote, it can be the decisive factor in your favour.

It Doesn’t Cost You Anything.

Forming an asset finance partnership with Commercial Finance Network means you will only be directing your customers to us. Your receivables will be fast-tracked directly to you, without you having to bear any extra costs.

Types of Asset Finance Your Customers Can Avail

  • Hire Purchase
  • Finance Lease
  • Operating Lease

Asset Finance Makes Life Easier for You and Your Customers

As a B2B, you’re going to have to take every measure to improve the conversion rates on all fronts. If you don’t close your customers, your competitors definitely will.

To know more about how Commercial Finance Network’s end-to-end asset finance services help your customers (and – in turn – you), do visit our asset finance page.

Help yourself by helping your customers. Contact us today to request a free asset finance partnership proposal!

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UK asset finance market remains on track for record year

Growth in asset finance new business (primarily leasing and hire purchase) for the UK remained stable towards the end of last year as the industry prepared to make a record year.

New figures released by the Finance & Leasing Association (FLA) for November show that plant and machinery finance and business equipment finance sectors grew 9% and 8% respectively compared to the same period last year.

Overall growth was slowed because finance demand for business cars and IT equipment fell by 6% and 32% over the same period.

Geraldine Kilkelly, head of research and chief economist at the FLA, said: “The asset finance market’s performance in November means the industry remains on track to report a record level of new business in 2018 as a whole.

“The percentage of UK investment in machinery, equipment and purchased software financed by FLA members reached 32.2% in the twelve months to September 2018, a nine-year high.”

Source: Asset Finance International

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UK invoice finance and asset-based lending grows despite economic uncertainty

The UK’s invoice finance and asset-based lending industry achieved modest growth, despite business uncertainty over the economy, new figures from UK Finance show.

The association’s invoice finance and asset-based lending update shows that advances stood at £22.6 billion at the end of Q3 2018, a rise of 2.4% compared to the same period last year.

Invoice finance accounted for 80% of lending by value, with most clients requiring factoring or invoice discounting.

The number of businesses using invoice finance and asset-based lending remained stable at around 40,400, of which 1,641 companies used asset-based lending in the quarter.

Overall, most clients were in the service, manufacturing or distribution sectors, with an average advance value of around £560,000.

For large businesses with a turnover of more than £100 million, support stood at £7.4 billion, with an average advance value of £17.2 million.

While there was growth overall, demand among small businesses with a turnover of less than £1 million fell.

The amount of finance provided to companies with turnover between £500,000 to £1 million was down 15% year-on-year to £436 million. Demand among companies with a turnover of less than £500,000 fell 5% to £664 million over the same period.

Stephen Pegge, managing director, commercial at UK Finance said: “Asset-based lending continues to show steady growth, driven mainly by advances to larger businesses.

“Support to small and medium-sized companies through invoice finance and asset-based lending is now comparable to total balances drawn on overdrafts.

“However, overall growth has remained modest in line with recent trends across SME lending, as businesses delay investment decisions until the broader economic picture becomes more certain.”

UK Finance is the collective voice for the banking and finance industry, representing more than 250 companies across the industry.

UK invoice finance and asset-based lending

Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018
Total advances (end quarter balances, all products) £m  22,039 22,135 21,633 21,408 22,567
Annual year-on-year growth 13% 5% 4% -2% 2%
Invoice finance – advances against debt £m 17,384 18,031 17,344 17,052 17,905
Invoice finance plus – advances against debt plus other assets £m 28 29 29 31 30
Total asset based lending £m 4.158 4.059 4.246 4.303 4,607
Against debt £m 2,860 2,693 2,822 2,850 3,127
Against stock £m 733 759 893 867 867
Against plant and machinery £m 391 450 378 426 442
Against property £m 96 85 86 94 102
Against other assets £m 78 72 67 66 69
Other commitment £m 19 16 14 22 25

Source: UK Finance