Lombard believes firmly that the manufacturing sector will not only have a prominent role to play in the recovery of the UK economy but that it will lead the way, laying the foundations upon which the rest of the business community will build. However, the strength and speed of this recovery is dependent on investment, which will in turn stimulate and support long-term growth.
With this in mind, Lombard has engaged with manufacturing organisations and representative groups in order to understand how we can best work with the industry to provide the funding to ensure that manufacturing equipment is innovative, productive and competitive.
The findings of our discussions have identified that, while there has been some increase in general lending, there are reoccurring areas where uncertainty remains. This article serves to give clarity and to provide confidence to approach financial institutions with your lending requirements.
The common themes have been:
l How much do we need to know about your business?
- What security is needed?
- What happens if times get tough?
How much do we need to know about your business? Lombard has operated in the asset finance market for many years – 2011 is our 150th anniversary. As a result we have a wealth of experience which helps us to understand the value of assets and which enables us to take a more flexible view when offering funding. This means that we will consider each funding submission on its individual merit and look at how we can lend you the money, as opposed to finding ways to turn down an application.
However, to assess your submission we need to understand your business. If you have a business plan that provides a background on your company and its financial history, information on the capital equipment you want to buy and why it is needed, as well as your objectives and projected revenue, this will enable us to make a valued assessment.
We work hard to develop strong relationships with our customers and this starts at an early stage, so the closer you work with our relationship managers and the more information you provide, the more likely you are to get the funding to buy that essential piece of equipment.
Don't think that because you are a new business, or moving into a new market, that you won't be considered. We are in the business of lending and providing we can see that we are not taking an irresponsible risk that is not in your interest or our own, we will find a funding solution that meets your business needs. Essentially though, the earlier you contact us, the better.
In the case of Stirland Paterson, a design, print and mailing company, the customer was informed by an auction house that a high-specification printing press was available at a very competitive price providing the sale could go through quickly. The finance director already had a clear 12-month business plan to upgrade the existing printing press. This meant Lombard could work quickly with the customer's bank to compile the data and to provide the £500,000 funding through a variable rate hire purchase agreement. The whole thing was turned round and the press delivered within two weeks. Of course, not every deal can be completed this quickly, but we will always do everything we can to help our customers meet their priorities and business commitments.
What security is needed?
Central to the concept of asset finance is, as the name suggests, the equipment being funded. In the majority of cases, the security is in the asset we are funding. We retain title for the duration of the agreement and in the case of hire purchase this is transferred at the end of the contract.
What happens when times get tough?
Many companies go through tough times, as many know only too well having recently experienced the worst economic crisis for 75 years. We understand that running a business can feel like a rollercoaster, with downs as well as ups.
So what happens when a business is having trouble keeping up repayments? Firstly, it is important to understand that Lombard is genuinely receptive to helping its customers through bad times.
While our arrears management team is there to collect debt, they also work with customers who are going through difficult times. To this end, we have a special team set up to deal with customers experiencing financial difficulties. The team will work with the customer to understand the root cause, and to restructure transactions in a manageable way. It could be renegotiating our own lending, extending the term, or offering seasonal or interest-only payments. If necessary we can work in collaboration with the customer's bank. We are committed to supporting the customer and exploring all options. Repossession of an asset is the very last resort. It is a scenario in which no one wins.
Our team has worked with many customers that have recovered from a period of uncertainty. Indeed, having developed a close understanding of their business, we have often not only continued to work with these customers but have extended the funding available to them and seen their businesses return to profitable growth.
In conclusion, Lombard is ready and willing to lend money to your business. We want to see a regeneration of UK manufacturing business but we know that capital investment will be key to success. So for those considering investing in equipment and technology to enable profitable growth, asset finance could well be the solution.
For more information, go to www.lombard.co.uk
Rapid agreement
Rapid Retail supplies the UK's biggest sporting venues with customised shop and merchandising units. It needed funding to underpin its growing business but its bank had turned it down. As director Nick Daffern explains: "Although our previous bank had an asset finance service, it wasn't receptive to our requirements… the units were deemed too risky and their future worth difficult to value."
In 2010, Rapid Retail moved to NatWest, which introduced it to Lombard. Relationship manager Ruth Davies structured a deal specifically for its situation. "It was difficult to determine the fair value of the units but we deduced that by looking at the company's overall portfolio, we could finance them against existing assets and contracts. No other provider had been prepared to take this stance but we were determined to find a solution."
Lombard's relationship with NatWest meant it could promptly bring together the asset checks and evidence needed to turn the deal around in just three months. As a result, Rapid Retail has been able to free up working capital and still take on £300,000 of new business. A hire purchase arrangement means it will own the units at the end of the term.
what are the key benefits of asset finance?
1 Minimises ownership risk Asset financiers take the risk on how much value remains in the asset at the end of the contract, and take responsibility for the disposal and management costs associated with ownership.
2 Releases tied up cash Sale and leaseback frees up the value within the asset. You will avoid having to draw on cash reserves that may be needed elsewhere in the business and that can be used to fund growth.
3 Opens up additional credit lines Acts as an extra facility that uses the financial value of a business' assets to complement cash resources and existing bank credit lines, such as overdraft facilities.
4 Eliminates uncertainty through fixed costs As the rental of the asset and the payable interest is fixed for the duration of the contract, it helps businesses plan for the future by eliminating uncertainty and costly surprises. Fixed rental over the term of the agreement creates certainty over economic cost of the asset.
Security may be required and product fees may apply.
