3 minute read
Direct Asset Finance: Where
Where thereʼs a will thereʼs a way
Creative asset finance, a route to recovery
Simon Knowler Managing Director Direct Asset Finance
We have learnt over the last year that you can never fully predict what the future will hold and that it’s wise to expect the unexpected.
Resilience is key on two fronts: within the business – not being overly dependent on any one market, customer, or supplier; and, within the owner – the mental resilience to withstand shock, adapt, and maintain a positive mindset.
We have witnessed this entrepreneurial mindset at its best throughout this year and last, as SME owners have adapted, pivoted, managed risk, and sought out new opportunities. The latest Global Innovation Index 2020 published by Cornell University, INSEAD and WIPO, which ranks the UK as one of the most entrepreneurial countries in the world, examines who will finance innovation. It highlights that whilst the sheer scale of the COVID-19 crisis could mean financial resources remain constrained and risk aversion high for some time to come, equally every crisis brings “...new opportunities and room for creative disruption”.
From direct discussions that we have had with business owners over the last few weeks, many are now seeing the next few months as a real crunch time – a triple whammy effect of business recovery and income not yet back to where it was pre-COVID, Government support packages starting to tail off, and inflationary pressures on input costs with disruption to supply chains from both COVID and Brexit and wage price pressures.
These pressures are echoed in the Q1 2021 survey results published by Close Brothers Asset Finance with 56% of UK SME business owners voicing concern about the impact Brexit is having on their normal trading and 75% feeling some degree of stress about current cashflow in the business.
Despite this, many are investing to build resilience in their business and future-proof; 24% are investing more in business assets as a result of the pandemic and 58% plan to seek additional finance for business investment over the next 12 months.
Asset finance can play a key role to help businesses maintain some essential cash headroom over the coming months. Providing creative solutions to help business owners weather the storm of continued instability and resolve the tension between the current pressure on costs and margins and the need to continue to invest to future-proof their business.
Many businesses will have taken on debt through the government CBIL, Bounce Back or Recovery Loan schemes over the last year;
however, many have found themselves financially stranded. As Ed Molyneux, CEO of FreeAgent recently stated: “It’s our small business entrepreneurs who will have the agility to respond to the demands and the opportunities of a post-COVID world. Until that world arrives we need to provide them with the right levels of support, otherwise they won’t be around to help us recover.”
By financing new assets, or re-financing existing assets, businesses can steady their cashflow and free up working capital to invest in the long-term revenue stream of the business, helping to offset current cost pressures and continued trading uncertainty.
We see ourselves as problem-solvers and through our interactions with clients over recent months, have identified opportunities to use asset finance creatively to help SMEs unlock working capital and overcome new challenges caused by COVID-19 and post-Brexit trading conditions.
A transport and logistics company, whose key sectors include aerospace and events and exhibitions was forced to downsize its fleet during the pandemic due to reduced demand. We helped the business use asset refinancing to raise additional capital from its remaining fleet, settle existing debt agreements, and provide working capital to rebuild capacity.
An established plant and equipment company was looking to source a new specialist trailer from Holland. Whilst we have successfully financed similar assets for the company previously, due to post-Brexit arrangements, funders were reluctant to provide financing without the asset in the country. This forced a rethink. Through refinancing an existing asset, we released sufficient working capital to enable the business owner to purchase the trailer and import to the UK, following which we refinanced the new asset, returning working capital to the business.
As the old saying goes, where there’s a will there’s a way. When a business owner needs to invest to build capacity, build resilience, and fulfil new opportunities, we pride ourselves in exploring all options to find a way to accomplish it regardless of obstacles.
