Financial Services

ASSET FINANCE OPTIONS TO KEEP YOUR BUSINESS ON THE ROAD

They say ‘Cash is King’ and certainly a healthy cash flow is vital to operational success, but the purchase of any asset can put a strain on business, so spreading the cost with Asset Finance along with structured repayments to free up much needed cash flow is certainly worth looking at.

Today, as never before, the transport and logistics industry faces challenges on almost every front – from driver shortages, Covid-19 restrictions, supply chain issues to vehicle availability, an unstable economy, slim margins and an increase in fuel costs; these are all additional pressures that many companies in the industry have to confront and deal with. All businesses, of course, have different needs at different times, so when it comes to financing your next big purchase you need to source an asset finance provider that can come up with flexible and tailor made solutions. From straight forward hire purchase packages to finance or operating lease solutions, asset finance has become one of the fastest growing finance options for all sizes of businesses, so there are plenty of providers to chose from, but choose wisely. Over the next few pages, Export & Freight takes a look at what’s available to help you manage your cash flow and keep the wheels of your business on the road.

PACCAR FINANCIAL OFFER SECURITY & PEACE OF MIND

Funding a truck rather than paying cash puts less strain on the cashflow, by spreading the costs associated with an asset over a longer repayment period. Cash retained in the business helps to support business investment and expansion plans, and as we’ve experienced in the last 18 months, provides a cushion against unforeseen events.

PACCAR Financial, for example, is offering operators an asset financial solution that can be made bespoke to meet a customer’s requirements; Lease and Hire Purchase, with variations within both options.

OPERATING LEASE

“Operating Lease enables the customer to acquire use of an asset with PACCAR Financial setting a future (residual) value which is at our, not the customer’s, risk,” says John Mabey, Sales Director PACCAR Financial Plc. He explains: “The customer pays the capital less residual back over the term plus interest, and at maturity returns the truck. PACCAR Financial then re-market the vehicle and hope to achieve the residual value to cover the balance outstanding. “This enables the customer to refresh their fleet on a regular basis, thereby keeping up with any changes in legislation – especially relevant as cities start to look at clean air zones, with older vehicles attracting daily charges to enter. “The rentals will be lower as the customer is not repaying the residual element, and, in addition, VAT is payable on each rental, thereby avoiding the large up-front outlay.” Operating Lease can also be packaged with DAF MultiSupport repair and maintenance to provide a “one stop shop” which is called ‘Hire Plus’. This provides all the advantages of an operating lease along with fixed running costs. The package can be built to include various elements such as tyres and road fund licence, in fact pretty much everything except vehicle insurance and fuel.

HIRE PURCHASE

Hire Purchase passes title to the customer at maturity, and VAT is payable on day one just as with a cash purchase. This product generally suits customers that tend to run their vehicles longer – perhaps because they cover less mileage or have a particular specification that they want to own and remarket themselves. “We can build in final balloon rentals to bring the payments throughout the term down, and subject to credit, fund 100% with no deposit. Rentals can be fixed for the term thereby avoiding any movement in money costs, or a variable option can be taken, with interest rising or falling as the bank base rate moves.”

CONTRACT PURCHASE

Contract Purchase is hire purchase but with a final optional balloon rental, the key word being optional. At maturity the customer can opt to pay the balloon and take ownership, or by giving notice can opt not to make the payment, and instead return the truck. This effectively gives the customer a guaranteed buyer of their vehicle, at a fixed price, regardless of market conditions. This gives the cashflow advantage of an operating lease, and the route to ownership that hire purchase gives.

John Mabey, Sales Director PACCAR Financial Plc.

FLEXIBLE SOLUTIONS

PACCAR Financial understands trucks and understands the business needs of truck operators. Subject to credit they can provide bespoke solutions to satisfy pretty much any scenario: • Deposits as low as zero • Funding term can be matched to your vehicle replacement cycle or to assist cashflow – anything from 12months to 84months. • Rentals can be monthly or quarterly. • A seasonal payment plan - so perhaps one month every year is payment free?

Handy in markets where the business has historical peaks and troughs? • Rather than pay cash, why not fund 50%?

So use some cash to keep the borrowing down, but keep the rest for a rainy day. “We are always willing to assist customers as their situation can change during the life of the agreement. This was brought into sharp focus in 2020, as COVID impacted businesses in ways nobody could ever have foreseen,” says John. “PACCAR Financial worked with hundreds of customers to restructure thousands of contracts and continued to provide new finance throughout. If we can support that many customers during such a devastating time, I am confident we can support our customers no matter what may happen.”

UNIQUE SELLING POINT

PACCAR Financial is a wholly owned subsidiary of the US corporation PACCAR Inc. who also own DAF Trucks. Everything they do is 100% in-house. “We lend our own money and set our own residual risk. When you deal with PACCAR Financial you can rest assured, we are here to support you acquire and run DAF product. Not just the first, but the next replacement and the one after that. “As we are part of PACCAR Inc. you can be confident you are dealing with a well-managed and strong business. There are many lenders in the market, but PACCAR Financial is the only one that truly understands and supports the DAF product range and should always be the first call you make when considering a DAF truck.”

SCANIA FINANCIAL SERVICES SUPPORTING INDUSTRY IN UNCERTAIN TIMES

Challenging times call for innovative solutions, which is where Scania Financial Services comes in, as Alan Rhodes, the company’s Managing Director, explains.

It’s hard to recall any other period in recent history where transport operators have faced so many different pressures all at the same time. Brexit, Covid, the driver and fuel shortages, supply chain issues, changing purchasing patterns, and new and used vehicle availability have all conspired to create high levels of uncertainty and unwelcome fluctuations in the economy. As a consequence, the stability industry needs and thrives upon seems further away than ever. From the point of view of those involved in the purchase of high value capital goods such as trucks, buses or coaches, any increase in operating costs - higher prices, wages or interest rates, for example - can have serious implications on cashflow. And as every business person knows, while rates are important it is cashflow that sends companies to the wall. That’s why we at Scania Financial Services have developed a range of products and services and have taken a number of steps to help operators through these challenging times. First and foremost, one of the key advantages we hold as part of the global Scania organisation is that we have an in-depth knowledge of the transport industry. In short, we speak your language and understand how your business works – and this often enables us to provide funding where others may choose to stand aside. One current example is the Recovery Loan Scheme (RLS), which is available to any operator in Northern Ireland who has suffered a poor trading experience due to Covid. Loans of up to £10 million per business, or £30 million per group, are available and we are the only heavy truck industry finance provider signed up to the scheme. The RLS can provide a significant boost to any business seeking finance, but you will need to speak to us about it quickly as the scheme is due to terminate at the end of this year.

Flexibility

Another major focus area for us is flexibility. We very much appreciate that businesses have different needs at different times, and here we have a number of ways we can help spread the load to suit. One example is Scania Freedom, which enables you to take an annual payment holiday of one or two months on a hire purchase agreement for the duration of the contract. This can make a big difference to anyone involved in seasonal work, or where there may be a temporary break in work for a period of time, such as in the construction industry in the event of extended spells of adverse weather. It can also help should a contract end unexpectedly as it provides time for replacement work to be sought. When it comes to repayments, we’re flexible there too; the cost can be repaid either by way of increased payments or additional payments added onto the end of the agreement. Another such service is Scania Flexibuy, which has all the traditional benefits of hire purchase but with the added flexibility of making overpayments, allowing you to repay your finance quicker and reduce your overall interest cost.

VAT Deferral

A third example is VAT deferral service we offer. If you are planning a major acquisition, we are able to fund the VAT element of it until you have reclaimed it from HMRC, which can take several weeks. This can make a huge difference to cashflow. We pride ourselves on being a trusted and reliable partner, so whenever customers have looked into the options available to them, we are happy to step in and explore ways in which we can help. As part of our UK- and Irelandwide team we have two specialists available locally to help develop solutions bespoke to our customers. Their contact details are below. Do please feel free to call them at any time to discuss your financial services needs. They will be delighted to hear from you and very keen to provide the help and assistance you require.

UK:

Greg Adams +44 7384 119 332

greg.adams@scania.com

REPUBLIC OF IRELAND:

Tomas Gannon +353 831 700789

tomas.gannon@scania.com

Scania Financial Services Managing Director, Alan Rhodes.

CLOSE BROTHERS COMMERCIAL FINANCE: ASSET FINANCE EXPLAINED

Close Brothers Commercial Finance is a leading provider of asset finance, invoice finance and asset based lending in Ireland. It has a range of funding solutions available and understands that there is ‘no one size fits all’ solution.

Its asset finance solutions enable businesses of all sizes to buy or lease the equipment, machinery and vehicles that they need. It provides two types of asset finance: refinance, which releases cash tied up in existing assets, and finance for purchasing equipment, machinery and vehicles, which allow businesses to spread the cost of tools.

Refinance

Refinancing facilities enable businesses to release money tied up in existing assets, such as machinery and vehicles. The premise is simple. A financier lends you cash upfront based on the value of your asset. Then, you lease the asset from them over a fixed term, and by the end of the agreed period, you own it outright again. This type of funding gives you immediate access to working capital that might otherwise be inaccessible, but unlike a traditional loan, the amount you borrow is secured against your asset. This can reassure SMEs and lenders alike and, as a result, can be a more flexible way to improve cash flow.

Funding for equipment, machinery and vehicles

Types of asset finance for equipment include hire purchase, finance leasing and operating leasing. Hire purchase enables SMEs to spread the cost of an asset over an agreed period. By paying in instalments, it is easier for businesses to budget and use their cash effectively. At the end of the term, you have the option to purchase the equipment, machinery or vehicles outright. In comparison, finance and operating leases allow businesses to benefit from the use of the asset without the responsibility of ownership. There is a low initial outlay associated with this solution, so you can gain access to equipment quickly and flexibly.

Tailored solutions

Close Brothers finance experts will take time to understand your business and will explain how each option works, as well as how it can help you to reach your goals. “We’re proud to provide a responsive, personalised service which adapts to business challenges and produces tailored funding solutions.”

About Close Brothers

Close Brothers is a UK merchant banking group providing lending, deposit taking, wealth management services, and securities trading. Close Brothers Group plc is listed on the London Stock Exchange and is a member of the FTSE 250. Close Brothers Commercial Finance is a trading style of Close Brothers in Ireland. Its core purpose is to help the people and businesses of Ireland and Britain succeed over the long term. To achieve this, all of its diverse, specialist businesses have a deep industry knowledge, so they can understand the challenges and opportunities that its customers and clients face. “We support the unique needs of our customers and clients to ensure that they thrive, rather than simply survive, whatever the market conditions.” Find out more about Close Brothers’ specialist asset finance options today at www.closecommercialfinance.ie