Keith Sangwin – United Trust Bank
If our experience is anything to go by, many UK SMEs appear to be largely unfazed by lacklustre economic growth forecasts and the continuing uncertainty created by Brexit. The run up to Christmas saw a strong level of activity at UTB with a wide variety of businesses employing asset finance to acquire vehicles, plant and machinery as well as to release capital from their existing assets.
The start of the new year usually brings a flurry of enquiries from construction companies looking to raise cash by refinancing some of their existing plant. The traditional 3-4 week shut down over Christmas can leave businesses short of working capital or sufficient funds to commence new contracts. Their first payment may be 2-3 months away, but they will still have wage, material and other bills to foot in the meantime. Refinancing one or two excavators or tipper trucks may provide a quick but cost effective fix to a short term problem. It’s quite common for us to receive an application on one day, give a decision over the phone, complete the paperwork and inspections and pay out to the customer the next. When there’s clear title to the assets and the figures are straightforward, same day pay-outs are possible too, especially when the customer has a particularly pressing deadline. There’s no comparison to the experience many businesses have when approaching their own bank for a loan or an extension to their overdraft, when even just getting a decision can take several weeks, several meetings and lots of hoop jumping.
Why is it that professional asset finance funders can move so quickly? It’s all about employing the right people and empowering them with a can-do approach. At UTB, every proposal is considered on the merits of why we should do the deal, not why we shouldn’t. There are no tick boxes or computer algorithms filtering out anything but the most vanilla of cases. The people taking calls from brokers are credit managers with the right skills and experience to enable them to talk through an application and, in the majority of cases, give conditional decisions right there and then during the call. There’s no substitute to being able to talk through a proposal directly with the broker. On marginal deals, by asking a few more questions in a five-minute call we can sometimes find an alternative solution to make it stack up or we’ll come across something the broker hadn’t considered important to the proposal but turns out to be the extra detail or security which enables us to say yes. You don’t get that through a call centre.
Construction firms aren’t the only type of business that can benefit from flexible refinancing. So, what makes a good refinance deal? For starters the customer must be realistic about the value of the asset. Funders will check that it’s correctly priced for its age and condition. Using resources such as CAP guides for vehicles as well as auction sales data, trade publications, internet searches and talking to other experts, we will assess the current and future resale value of the asset to ensure that it provides reasonable security for the funding being sought. Although UTB doesn’t have a restricted age policy, many lenders do. This means that they will not finance assets which will reach a certain age within the term of the facility. This can be a problem for SME borrowers which often have perfectly serviceable assets but which may have been around the block a few times. For example, if a tractor unit will be over 10 years old within the finance term some funders will decline the proposal, no matter how tidy it is. At UTB we look at every asset as having a value and as long as the funding required falls within our valuation we don’t mind if the asset has a few more years or miles on the clock. If you’re turned down by one lender because the asset is a few years old, it doesn’t mean all lenders will do the same.
This case is a great example of how refinancing can help a company to quickly release capital tied up in assets to be spent on something completely unrelated to the assets themselves. This firm wished to refinance a number of unencumbered curtain sided trailers to enable it to put an additional £125,000 towards the renovation and expansion of their workshop, service and office buildings. Having agreed to provide the funding requested, one of UTB’s asset finance BDMs, carried out a number of asset inspections at locations where the trailers were on hire and satisfied that the assets were in order, we released the requested funds to the customer within 48 hours of receiving the initial proposal.
According to one of our recent broker surveys, more than half of brokers who took part suggested that finding funding for SMEs had become easier over the last year. Increased competition in the sector has been good news for customers. The cost of funding has fallen to record lows for most customers and lenders generally have continued to reduce margins to compete. That coupled with funders like United Trust Bank continuously extending the range of assets we will consider for purchase and refinance means that SMEs have a wide range of options available to them when opportunities to invest in their businesses arise.