Commercial vehicle finance
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Commercial vehicle finance underpins UK asset finance market growth

Commercial vehicle finance was one of the only growth markets during August for UK asset finance new business (primarily leasing and hire purchase), according to new figures from the Finance & Leasing Association.

Finance for commercial vehicles was up 11% year-on-year in August and it has risen 14% over the past 12 months.

Other sectors were less buoyant, with plant and machinery up 1% during August compared to the same month last year, while business equipment finance and car finance were down 1%. Aircraft, ships and rolling stock finance nearly doubled, but it only makes up a small proportion of the asset finance market.

Geraldine Kilkelly, head of research and chief economist at the FLA, said: “August saw further double-digit growth in new finance provided for commercial vehicles as businesses were keen to invest in the newest technology.

“The strong performance of the industry so far this year meant it funded over 41% of investment in machinery, equipment and purchased software in Q2 2019, an 11-year high.”

Responding to the results, Chirag Shah, chief executive officer, Nucleus Commercial Finance, said: “We’re seeing more and more SMEs turn to asset-based finance to support their business ambitions, whether that be to restructure, deliver further growth or to enhance their cash flow.

“Despite the growth in the market, a major knowledge gap still exists when it comes to SME funding, particularly how asset-based lending solutions can be used to help businesses achieve their goals by leveraging assets such as property, stock and machinery. There is a big opportunity for the market to continue growing and it’s therefore our responsibility as an industry to educate SMEs on all the options available and to demonstrate the positive impact alternative finance can have on a business.”

August 2019 % change on

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August 2019

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Total FLA asset finance (£m) 2,452 0 8,778 +5 34,311 +6
Total excluding high value (£m) 2,321 +1 7,946 +2 31,820 +5
By asset:
Plant and machinery finance (£m) 585 +1 1,842 +5 7,343 +11
Commercial vehicle finance (£m) 667 +11 2,256 +11 9,110 +14
IT equipment finance (£m) 166 -16 704 -15 2,692 0
Business equipment finance (£m) 211 -1 1,626 -4 2,622 +4
Car finance (£m) 572 -1 2,269 +2 8,935 -2
Aircraft, ships and rolling stock finance (£m) 19 +95 173 +126 533 +115
By channel:
Direct finance (£m) 1,160 0 4,042 +4 16,086 +6
Broker-introduced finance (£m) 513 +6 1,627 +5 6,574 +12
Sales finance (£m) 648 0 2,276 -3 9,160 -2
By product:
Finance leasing (£m) 310 +4 987 +2 4,321 +11
Operating leasing (£m) 430 -2 1,478 -2 6,098 -4
Lease/Hire purchase (£m) 1,373 +3 4,927 +7 19,408 +10
Other finance (£m) 270 +13 954 +3 3,252 +6

Source: FLA

Written by John Maslen

Source: Asset Finance International

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Asset finance share of UK equipment investment highest for a decade in May

Asset finance new business (primarily leasing and hire purchase) in the UK for deals of up to £20 million grew by 6% in May, compared to the same month last year, according to new data from the Finance and Leasing Association.

When deals over £20 million are included, the market fell by 1%.

New finance for plant and machinery and commercial vehicles both grew by 8% year-on-year during the month, while the business equipment finance sector reported new business up by 3% over the same period.

The car finance market was static, while the IT finance sector fell by 9% year-on-year.

Geraldine Kilkelly, Head of Research and Chief Economist, said: “The asset finance market continued to report growth across many sectors in May, with new business overall up by 8% in the first five months of 2019.

“The strong performance so far this year means that the industry is helping to fund an increasing share of business investment.

“The percentage of UK equipment investment funded by asset finance members in Q1 2019 was 38%, the highest for more than a decade.”

Written by John Maslen

Source: Asset Finance International

how does it work asset finance UK asset finance market
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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

Freshfields
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UK asset finance market grows by 11% in first quarter of 2019

Asset finance new business (primarily leasing and hire purchase) grew by 11% during Q1 2019 compared to the same period last year, according to new figures released today by the Finance & Leasing Association (FLA).

New finance for manufacturing and construction equipment increased by 25% and 26% respectively, compared to Q1 2018.

The growth followed a strong market in March, which grew by 11% year-on-year, with including particularly high growth in commercial vehicle finance and IT equipment finance sectors.

All channels delivered growth during the quarter, although the strongest performance came from broker-introduced finance, which rose 19% year-on-year.

During March, broker-introduced finance accounted for 19% of sales, up from 18% for the same period last year, while direct finance took 50%, down from 51%, and sales finance 30%, down from 31%.

Geraldine Kilkelly, head of research and chief economist at the FLA, said: “The asset finance market reported a record level of monthly new business in March and the strongest quarterly growth in Q1 2019 since Q3 2016.
“Asset finance continued to support key sectors of the economy in the first quarter.”

March 2019 % change on

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March 2019

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Total FLA asset finance (£m) 3,679 +11 8,490 +11 33,447 +7
Total excluding high value (£m) 3,403 +7 7,861 +9 31,069 +5
By asset:
Plant and machinery finance (£m) 728 +11 1,861 +12 7,055 +8
Commercial vehicle finance (£m) 994 +17 2,231 +23 8,402 +14
IT equipment finance (£m) 211 +5 612 +18 2,808 +19
Business equipment finance (£m) 252 -1 623 +2 2,670 +5
Car finance (£m) 993 -3 2,209 +2 8,940 -3
Aircraft, ships and rolling stock finance (£m) 111 +238 147 +122 392 -12
By channel:
Direct finance (£m) 1,711 +5 3,926 +7 15,492 +4
Broker-introduced finance (£m) 658 +19 1,642 +19 6,354 +16
Sales finance (£m) 1,033 +3 2,293 +5 9,223 +1
By product:
Finance leasing (£m) 429 +6 1,040 +14 4,220 +11
Operating leasing (£m) 645 -10 1,447 -6 5,894 -9
 Lease/Hire purchase (£m) 2,006 +9 4,756 +15 18,769 +11
Other finance (£m) 439 +53 963 +24 3,240 +7

Written by John Maslen

Source: Asset Finance International

Freshfields
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UK asset finance market reaches record level in 2018

The UK asset finance market reached a record level during 2018 with new business totalling almost £33 billion.

The rise of 3% compared to 2017 represents the eighth consecutive year of growth for the industry, according to the Finance and Leasing Association, and comes despite the disruption of ongoing Brexit negotiations.

Asset finance new business (primarily leasing and hire purchase) grew in December by 7% compared with the same month in 2017, and by 5% during Q4 2018 as a whole.

The plant and machinery finance and commercial vehicle finance sectors reported new business up in December by 29% and 18% respectively, compared with 2017, while new finance for IT equipment was up by 16% over the same period.

Direct finance was the main form of funding approved during the year, accounting for £15.3 billion, a rise of 2% year-on-year, while sales finance was down 1% to £9.1 billion. Broker-introduced finance grew strongly, rising 12% year-on-year to £6 billion.

Lease/hire purchase remains the most popular form of funding, accounting for more than £18 billion of finance last year, a rise of 8% compared to 2017.

Geraldine Kilkelly, head of research and chief economist at the FLA, said: “The temporary increase in the Annual Investment Allowance for plant and machinery from January 1, 2019 announced in the last Budget should support further growth in this sector over the next few months.”

During 2018, FLA members provided a total of £137 billion of new finance to UK businesses and households. FLA members financed around third of UK investment in machinery, equipment and purchased software in the UK in 2018.

UK asset finance market 2018

Dec 18 % change on

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Dec 18

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Dec 18

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Total FLA asset finance (£m)  2,788 +7 8,236 +5 32,571 +3
Total excluding high value (£m) 2,501 +8 7,656 +4 30,472 +3
By asset:
Plant and machinery finance (£m) 660 +29 1,786 +18 6,849 +5
Commercial vehicle finance (£m) 673 +18 2,218 +14 7,984 +7
IT equipment finance (£m) 342 +16 674 -9 2,714 +15
Business equipment finance (£m) 247 +11 735 +16 2,659 +4
Car finance (£m) 617 +3 2,040 -7 8,893 -5
Aircraft, ships and rolling stock finance (£m) 30 -17 123 +105 312 -43
By channel:
Direct finance (£m) 1,268 +13 3,833 +5 15,259 +2
Broker-introduced finance (£m) 502 +8 1,629 +12 6,090 +12
Sales finance (£m) 731 -1 2,195 -5 9,123 -1
By product:
Finance leasing (£m) 381 -4 1,134 +11 4,094 +8
Operating leasing (£m) 511 0 1,531 -6 5,981 -11
Lease/Hire purchase (£m) 1,532 +28 4,658 +13 18,158 +8
Other finance (£m) 249 -3 637 -5 3,052 -3

Source: Asset Finance International

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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Brokers overcome uncertain economy to guide UK asset finance market towards record levels

Asset finance new business (primarily leasing and hire purchase) grew by 9% in October, compared with the same month last year, pushing the market closer to an all-time record, according to new analysis.

Latest figures from the Finance & Leasing Association (FLA) show that the plant and machinery finance and business equipment finance sectors had particularly strong new business growth, rising 16% and 29% respectively, compared with October 2017.

New finance for commercial vehicles increased by 23% over the same period.

For the 12 months to the end of October, asset finance demand has grown 9% compared to the previous 12 month period, or 3% excluding high-value items.

Growth has come almost entirely from broker-introduced finance, which was up 22% in October compared to the same period last year and 12% over the past 12 months.

Geraldine Kilkelly, head of research and chief economist at the FLA, said: “The asset finance market made a strong start to the final quarter of 2018, with new finance for construction and agricultural equipment up in October by 27% and 19% respectively, compared with the same month in 2017.

“Asset finance new business in 2018 as a whole is likely to reach a record level, despite continued economic uncertainty weighing on business investment.”

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

Brexit
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Brexit uncertainty is causing business delays

Two thirds (67%) of brokers operating in the asset finance sector believed that Brexit is causing some businesses to delay investing in vehicles, plant and machinery, United Trust Bank (UTB) found.

The remaining 33% felt that Brexit was not affecting the companies they dealt with.

Figures from the Finance and Leasing Association (FLA) showed mixed results for different sectors with funding of plant and machinery in December 2017 just 1% higher than in December 2016.

Keith Sangwin, head of sales, asset finance, United Trust Bank, said: “We’ve had a busy year so far at United Trust Bank and for those companies which, regardless of Brexit, are confident in their business plans the market is extremely competitive, especially for strong credits.

“The rates we’re now able to offer customers with solid trading accounts and consistent credit histories are the lowest they’ve ever been.

“As a responsible lender we’re keeping a very close eye on the economy and taking account of all contributing factors, not just Brexit.

“However, UTB’s reputation for being a robust and dependable funder through all market conditions is as valid now as it ever was. The Bank continued to lend throughout the financial crisis and our book is very much open now.”

Commercial vehicle finance was down 14% and the big assets including ships, planes, rolling stock were down by 41%.

However, broker introduced business increased by 14% from 2016 to 2017 with brokers accounting for around a fifth of new leasing business by FLA members, still the fastest growing channel.

UTB’s research was carried out just before the announcement that a breakthrough had apparently been made by the UK and EU Brexit negotiators in agreeing the terms of a transitional period. It remains to be seen whether this will give businesses, and SMEs in particular, greater confidence.

Sangwin added: “The next 12 months are going to be very interesting. Politics and the economy are going to continue to dominate the news, but many businesses will not be directly affected by Brexit and will continue operating much as before, serving a UK or even more local customer base.

“United Trust Bank is one of those businesses. As a UK bank with UK customers we’re confident that we’re ready to face whatever the future may hold, and we’ll continue to support brokers and our SME customers, helping them to seize opportunities with quick and competitive funding.”

Source: Mortgage Introducer