We Are Lending…
As High Street banks baulk at backing Recovery Operators with funding for new vehicles, financial services are prepared to talk and act.
That distant bugle call growing louder means the financial services cavalry is charging to the rescue of cash strapped Recovery Operators who need extra trucks and trailers, but can’t get their bank manager to assist or even listen.
Financial services can offer the full range of financial options to help Recovery Operators. They confirm their commitment to the transport and recovery sector, funding all types of trucks, trailers, forklifts, service vans and most other equipment needed by recovery operators.
They are able to provide initial finance for many start up businesses in the recovery sector, and well able to deal with owner operators through to public limited companies.’
Providing finance, they control the assets and for new business starts it is possible to have the driver behind the wheel in a short period of time in any make of truck, whether new or even up to ten years old – all subject to credit and status of course.’
Many financial services are totally independent and not linked with any truck or trailer manufacturer. In normal circumstances they provide the haulier a credit line and he buys what he wants. Some services provide a unique finance service by offering a credit line for a truck at auction. They clear the amount available with the auctioneer and if the client makes a successful bid they will settle the bill direct, although it has to be said that these days most truck buyers would prefer to work with an established commercial dealer to ensure continuation of repair and maintenance packages etc.
Again some providers of finance will also fund user to user transactions meaning that one recovery operator can buy a truck or trailer from another operator.
Typically services will advance from £10,000 on a used truck to £1 million on a fleet of new vehicles. The term of credit will be a maximum five years or as Close Asset Finance like to put it, the useful working life of the asset to that business.
In the case of tippers for instance, it could mean three years.
Personalised lenders will offer a prior personal visit which in turn is beneficial for future business when, because contact has been made, only a short decision process is then required.
Like every progressive business these days there is full use of the website, often offering an online brochure but as a personalised lender tend to not go down the route of online proposals, but listing current fleet of repossessed trucks and trailers.
Independent financial services differ greatly from the High Street banks. For a start, many have local area managers with special knowledge of the vehicle recovery industry.
GOOD UNDERSTANDING
Clients are visited at their place of business which helps to achieve a good understanding of their needs and specific problems. They also make fast decisions, often within 24 hours thanks to the short lines of communication within a comparatively small company unlike High Street banks, where they are just as keen to fund used vehicles and equipment as new.
If a truck operator is asking for refinance from a bank and doesn’t own heritable property, he’s pretty well had it. In addition, banks assess the value of trucks down to 10%, allegedly because it’s an asset that can disappear… The fact that it is insured appears to be immaterial.
It is obvious that raising money from banks will be difficult for some years to come so there is no better time to approach specialist providers of hire purchase and finance leasing, depending on the tax/balance sheet requirements of the customer.
Structured payments can fit into cash flow requirements for instance, as seasonal payments based around a particular contract or lower payments towards the end of an agreement to allow for higher maintenance costs. Conversely, fixed rates allow for accurate budgeting and VAT can be spread over the period of agreement by using a leasing product.
Financial services are generally experts in the world of refinance that can be embraced by companies having capital tied up in their fleet which they would like to release for a variety of reasons such as reducing or paying off a bank facility (which can be recalled by the bank on demand). Also, capital can be released to develop the business such as taking on a sales person, building a workshop or acquiring additional land.
And then there is payment restructuring, which is graphically described by Colin Swanston who has a customer who was 12 months from completing monthly payments on three trucks but due to loss of a contract the payments became too high. He organised refinancing the trucks over another three years at half the monthly repayments therefore reducing the pressure on cash flow.
Case studies in fact provide graphic illustrations of how versatile finance packages can work to everyone’s advantage; Colin Swanston provided just such an example.
‘They needed £50,000 to build a workshop on land that they owned which would allow them to move out of leased premises and reduce monthly outgoings by several thousand pounds.
‘The bank had refused to assist on the basis that the current bank overdraft was sufficient exposure to a transport related company.
‘In addition, the company had three fairly new vehicles which were 15 months from completion of the hire purchase finance. However, the deals had been funded over a short repayment period and the instalments were consequently high. The finance company in question had declined to assist in rescheduling the deal.
‘So we came up with the solution: Given that the company intended to keep the vehicles for another three years, we refinanced them and reduced the monthly outgoings by around £1,400.’
‘We additionally looked at the asset register of the company and found that five additional vehicles were now unencumbered and free of finance. A valuation was quickly carried out and came in at circa £65,000.
This was sufficient cover for us and a refinance deal was structured which released the £50,000 to fund the construction of the workshop.’
‘Taking the monthly saving of the restructured finance agreements into account, this was achieved without increasing the overall monthly outgoings of the business, therefore preserving free cash flow as protection against any unforeseen problems with the business or with the construction of the new building.’
It’s an interesting case study which underlines the versatility of personalised financial services and their willingness to do business particularly at a time when the banks seem keen to shy clear of funding exposure which perhaps gave rise to a recent comment by Paul Everitt, chief executive of the SMMT who said, ‘Commercial vehicle production is severely affected by low business confidence and economic uncertainty. Businesses across the economy want better access to finance and stronger domestic demand.’
Acknowledgement to Close Asset Finance for this article.
