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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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Why open banking creates a new landscape for asset finance

A new era in finance starts this weekend as the deadline passes for major banks to comply with new open banking legislation that promises to revolutionise consumer and business funding.

In truth, the revolution has started with a whimper rather than a bang, as many of the major banks have secured an extension beyond the January 13 deadline for the new regulations, but over the long-term, it has the potential to change how businesses and consumers source finance.

Open banking is a general term that describes two pieces of regulation: the Competition and Market Authority’s ‘Open Banking Remedy’ and the European Second Payment Services Directive (PSD2).

It requires banks to provide access to current account data to third-parties if customers give their consent.

Through open Application Programming Interfaces, banks can share data with third parties in a secure manner, without customers having to make their usernames and passwords public.

APIs are already commonly used in a range of business environments, such as insurance companies automatically retrieving vehicle data from government databases to speed up the quotation process.

Open banking carries more risks, as companies will be delving into financial data of consumers and businesses, so security is paramount, hence the request for more time from some banks.

Every company using open banking to deliver their services has to be authorised by the Financial Conduct Authority (FCA) or another European regulator.

Gavin Littlejohn, chair of fintech industry body The Financial Data and Technology Association (FDATA) and fintech representative to the UK’s Open Banking Implementation Entity (OBIE), said: “Our industry has offered services that let customers – around two million at the last count – give our member firms direct access to their accounts for several years.

“However, the method we have had to use, which literally ‘reads’ customers’ online banking screens, has never been what we would have chosen.

“We are enthusiastic about the potential of open banking, which provides a direct feed into and out of accounts using tried and tested and highly secure standardised communications technologies.

“There is a lot of work still to do to bring the full benefits of open banking to UK consumers and businesses, and we now need to work closely with colleagues in Europe to align this solution to the standards being worked on there, but this is a momentous milestone.”

Auto finance provides a good example of how APIs and open banking could change finance transactions.

Often requests for finance require substantial amounts of paperwork and scanned or printed documents from bank accounts, which all takes time to review and process.

Under open banking, APIs can make customer financial data available for immediate analysis by the finance provider, enabling in-depth reviews of their financial status to confirm affordability and support compliant sales processes in seconds.

In addition, aftersales functions such as a change of address, or a request to adjust the terms of a loan, can be carried out more quickly.

The use of APIs means that finance providers can plug this new data source into their existing systems to transform application processes.

Rob Haslingden, head of product marketing and propositions at Experian, said: “The additional data can be used on top of credit risk data to give an overall view of affordability.

“So, under open banking, the API can give up to 12 months of transactional data to reveal discretionary spending as well as regular bill payments. This can then be interrogated to iron out things like one-off payments or seasonal variations and you get an overall view of affordability rather than just credit risk – which is more for the lender than the customer.”

Therefore, APIs can take finance beyond credit scores and make the experience more personal to each customer, while also minimising risk by giving a clear picture of someone’s true financial position.

It is also important in a customer experience context too, as it potentially saves customers from being asked in-depth questions about their finances on a face-to-face basis – something that many find awkward.

Continual sharing of data will allow for better loan management.

Gareth Lodge, analyst at Celent, said: “Product providers can see how much an existing loan is, what the term left is, the rate of interest and penalties etc., and therefore potentially be able to intervene before a loan reaches term to start the conversation about renewal or other appropriate steps.

“Product manufacturers will be able to use data to hone their offering, assess affordability, improve their general service and add value via better and faster risk modelling technology at their own back-end.”

Richard Ryan, partner at Invigors, added: “Companies involved in asset finance and leasing are now seeking revenues that extend beyond just making a percentage on a loan. They are looking to use data to provide value-added services that can be effectively monetised and therefore add to the bottom line.”

While lenders will benefit because they can provide a more personal service and swift finance agreements, the use of open APIs is likely to increase competition as aggregation services step into the space between the customer and the finance company.

For example, rather than customers being offered a generic finance quote for their next car, they could receive personalised quotes from a panel of lenders in real-time.

However, this may be a key step in ensuring customers receive the service they have come to expect in many other industry sectors.

The flow of data via APIs makes for easier and better decision-making by asset finance providers.

Steve Taplin, global sales and marketing director at Alfa, said: “Allowing data to flow between customer, dealer and finance provider makes for better automation and therefore service – which leads to retention and loyalty.”

James Tew, CEO of finance platform iVendi, added: “If a dealer can key in information once but then access a number of lenders, track the process and see the likelihood of a deal being accepted all via an app that sits on their website, then that adds value to them.”

In the US, Capital One has built an open API platform to enhance the auto financing experience, which is being used by Vroom, an online direct car retailer that allows customers to order a car on their computer and have it delivered to their home.

Shishir Singhania, from Capital One, said: “The API allows consumers to get the loan for the vehicle while sitting on the computer at their house, versus having to go offline and talk to someone. That is a unique experience.

“That provides a layer of transparency to our consumers that they never had before because they had to talk to an F&I manager in a store and work with them to find out what the terms of the loan would be.

“When the customer is buying a car, they are trying to figure out the rate they need to pay, what their monthly payments would be and they want to have the flexibility of changing certain things in the loan. The API can answer those questions in a pretty seamless way while they are on Vroom’s site.

“It is very sophisticated to give consumers the answers they need, but as a consumer, it is very simple.”

APIs are also being used by finance providers in other ways to help improve the customer experience.

Black Horse Finance is in the middle of a phased rollout of open APIs.

The first one, which is already in use, allows the customer to get a settlement figure.

Jim McCaffrey, director of customer propositions and business enablement at Black Horse Finance, said: “Getting a settlement figure is a high-volume request that is relatively straightforward to fulfil. It’s acted as a proof of concept but now the plan is to extend the range of services and partners so things like quotes, credit decisions, figures for future value as well as aftersales service will all be available.”

Whatever the platform, the success of the open banking system in delivering a better customer experience in auto and equipment finance will be reliant on the customer being willing to share their data in the first place.

Research from Accenture in October 2017 said that two-thirds of consumers in the UK would not share their financial data with third-party providers such as online retailers, tech firms and social media companies.

More than half (53%) said they will never change their existing banking habits and adopt open banking.

It is likely that patience will be required to give consumers time to assess the idea of data sharing in return for better service.

Taplin said: “Of course there is concern, but customers have already given their data to the asset finance provider in order to transact with them – there need to be clear rules that are understood and here standardisation does come into play.”

Haslingden added: “If consent is given then providers can build that data into their lending processes and make operational gains and provide a better customer experience. But they will need to position the advantages of data sharing to customers very well in the first place.”

Source: Asset Finance International

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Lender clears £13.2bn of government loan repayments

The company behind Bradford and Bingley and Northern Rock Asset Management has paid back £13.2bn in government loan repayments.

In its six-month results up to 30 September, Bingley-based UK Asset Resolution said that of the £13.2bn repayments, £11bn was from its Financial Services Compensation Scheme debt. The company said that 76% of its government loans have now been repaid.

As part of the plan to repay the FSCS loan, UK Assest Resolution completed the sale of two separate B&B asset portfolios to Prudential and funds managed by Blackstone and launched a further asset sales process that, subject to market conditions and value for money, is expected to repay the loan in full.

Underlying pre- tax profit reduced by 41% to £238m. Mortgage accounts three or more months in arrears, including possessions, reduced by 9% since March 2017 bringing the total reduction to 89% since formation.

Ian Hares, chief executive, said: “In the first half we finalised a major sale of assets and, subsequently, we have launched the next stage of the asset sales programme designed to repay the remaining FSCS debt. These are major steps towards realising our objective of reducing the Balance Sheet while continuing to maximise value for the taxpayer. It is pleasing that we continue to see high levels of service delivered for our customers.”

It was in April that £11bn of the FSCS loan was repaid using the proceeds received from the sale of two separate B&B asset portfolios to Prudential and funds managed by Blackstone. In October, a further asset sales process was launched will enable the repayment of the remaining £4.7bn of the FSCS loan. The transaction is expected to complete during the first half of the 2018/19 financial year.

Since formation in October 2010, the UKAR Balance Sheet has reduced by £94.7bn, including £40.9bn of customer loan repayments and £27.2bn of asset sales, which have facilitated the repayment of £57.5bn of wholesale funding and £36.8bn of government funding.

As at 30 September, lending balances stood at £18.2bn (FY 2016/17: £19.5bn).

Statutory profit reduced to £216.8m from £480.4m reflecting the declining mortgage book, £43.5m additional provisions for PPI claims and the prior year benefiting from a £51.0m profit on sale of loans and an insurance recovery of £50.0m in relation to remediation losses incurred by NRAM in 2012.

The number of mortgage accounts three or more months in arrears, including those in possession, reduced by 9% from 4,617 at March 2017 to 4,196 at 30 September 2017. The total value of arrears owed by customers has fallen by £2.5m from March 2017 to £35.2m, a reduction of 6.6%. This reduction is a direct consequence of proactive arrears management coupled with the continued low interest rate environment.

In total, UKAR has 139,000 customers (FY 2016/17: 148,000), with 149,000 mortgage accounts (FY 2016/17: 158,000) and 32,000 unsecured personal loan accounts (FY 2016/17: 35,000).

The company said that the majority of these loans continued to perform well with more than 93% of mortgage customers up to date with their monthly payments. In addition, UKAR continues to provide oversight of the 98,000 accounts (56,000 customers) sold to Prudential and Blackstone as part of an interim servicing arrangement.

Source: The Business Desk

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Distiller secures finance to acquire historic Rosebank site

IAN MACLEOD Distillers has secured a funding deal worth £80 million, revealing that the finance will be used to underpin its recently-announced acquisition of Falkirk’s historic Rosebank Distillery.

The Broxburn-based distiller, which owns the Glengoyne and Tamdhu single malts, said it will also use the loan package to drive its organic growth ambitions.

The asset finance facility, which has been jointly provided by Bank of Scotland and PNC Business Credit, is secured against the distiller’s whisky stocks. Its most recent accounts show that the value of stock held by the firm stood at £76.5m at September 30, up 14 per cent on the year prior.

As part of its new funding deal Bank of Scotland will provide Ian Macleod, which acquired Edinburgh Gin last year, with day to day banking services, including a £250,000 overdraft facility.

It comes shortly after the distiller announced that it is set to restore production at Rosebank Distillery, which has been silent since 1993.

Ian Macleod has agreed a deal to acquire the stock and trademark from Diageo, while securing a separate agreement to purchase the site from Scottish Canals, subject to planning consent. Rosebank Distillery sits on the banks of the Forth & Clyde Canal.

Mike Younger, finance director at Ian Macleod Distillers, said: “Bringing the iconic Rosebank distillery back to life is a big project, and one that we’re incredibly excited about.

“We are very pleased that we now have a funding package which allows us to both rebuild Rosebank and fund the general expansion of the business.

“Asset based lending is ideal for us, as it provides highly flexible funds secured against our appreciating maturing whisky stocks.”

Source: Herald Scotland