Many businesses use asset finance but often only for the purchase of new equipment- i.e. the most obvious tangible items that are the ‘bread and butter’ of most asset finance lenders.
Asset finance can however be used more creatively – here are some examples of cases I have been involved in:
- A business owner who wanted to raise the contribution he had to buy the freehold of the property he currently leased. Within the fixtures and fittings that came with the building was a large built-in crane. We were able to get this valued and a commitment was obtained from a lender to advance a useful sum contemporaneously with purchase. It supplemented a conventional commercial mortgage (as the combined repayments were manageable) enabling the purchase to go ahead.
- A company with a product that was of modular construction, where each job required a different ‘build’ for it to then be rented out to the user on a good profit margin. On expiry of the rental period the product was returned, deconstructed with the durable compenents then used again for later jobs. The challenge was that the business growth was so fast they didn’t have the finance to manufacture components to the volume needed – and the modular nature meant conventional asset finance didn’t work. To solve the problem a quasi ‘vendor finance’ scheme was put in place to effectively lend an up-front sum which would then be covered by future rental income with the security being the covenant of the end user (who in this case were ‘blue-chip’) instead of the physical asset itself.
Always worth looking at how an unconventional use of asset finance can help unlock a funding problem for a business.