Norman Carson, our Director of Business Development, explains how asset finance brokers could provide small business clients with extra working capital through Boost Capital.
When I was watching the recent Budget, it came as no surprise to me that the Chancellor acknowledged that the banks still aren’t lending enough to small firms. That’s what we hear from our customers every day. And I was pleased with the announcement that the Government may legislate to force conventional lenders to introduce SMEs whose loan applications have been rejected to alternative sources of finance.
But it made me wonder how many owners of SMEs realise what our business can do to offer them short-term working capital. And I also thought about the broker community that works so closely with small firms, and whether these financing intermediaries are also fully aware of the ways in which Boost Capital might enhance what they already offer their small business clients.
My background is in asset finance, as I’ve explained before, and I spent the better part of 30 years working with brokers and specialist funders who provide small firms with much-needed vendor finance and leasing facilities. In my professional life, I’ve come across SMEs that require funding for all manner of things – be it to buy equipment, to invest in new vehicles or to refurbish a factory. No two businesses’ needs are the same, and there are usually various complex factors affecting the type of finance that they decide upon.
If a business is investing in a large piece of expensive equipment, it often makes sense for the bosses to opt for a leasing arrangement to spread the cost over a number of years, avoiding a damaging hit to cashflow. But often there are additional expenses that may not be immediately obvious – or even necessarily that costly – but that still need to be paid for. A slice of short-term finance can meet these extra demands on working capital, and this is where Boost Capital has the potential to make a real difference. A broker could arrange a multi-year lease to fund the main purchase, as per usual, but also give the business owner the option of a separate loan with us over, say, four to six months to cover the other intangible expenses associated with the investment.
I could cite countless examples. Let’s say that a haulier buys a new truck for £100,000, and turns to asset finance to borrow this sizeable sum over a manageable timescale. All well and good. But then he realises that there’s the licence that goes with the vehicle at an extra cost of several thousand pounds. It’s money that the business owner still doesn’t have readily to hand, but that he doesn’t necessarily want or need to borrow across a number of years. A quick in-and-out loan over a few months could be an ideal way of meeting this extra bill. This is just the type of borrowing in which Boost Capital specialises – loans between £3,000 and £500,000, designed to be repaid in a maximum of 12 months.
Taking another scenario, a business owner has arranged a seven-year lease to acquire a printing press. It turns out that there’s also a power unit needed to run this energy-hungry new equipment. Spreading the expense of the main piece of kit over time makes sense, but does the owner really want to be saddled with the second, minor debt for so long when he or she could be clear of it six months later?
Asset finance has been the main driver in the SME marketplace for a long time. Small firms know it, understand how it works, and like it. But it has sometimes struggled when additional, intangible elements like these have emerged in a project and they’ve proved hard to finance. That’s where we can help. There are lots of advantages to the way that we do business. Not only are our loans typically paid back quickly, but they are fast to organise, too. We look at the health of a company as it is today – no demands for proof of profitable trading going back years, or conditions that we will only lend with some security against the debt. It’s a new way of doing things in the UK, and I understand that it’s taking some time for the world to catch up with how we work.
I want to emphasise strongly that we are in no way decrying what the traditional asset finance industry does. On the contrary, I believe that we can and should work together more to help SMEs get the right type of finance for their needs in any given situation. What Boost Capital offers is supplementary – and complementary – to what these experienced, knowledgeable brokers already do. Theirs is the industry in which I grew up and I respect it enormously.
My objective is to give small businesses the greatest choice possible when it comes to filling the funding gap and finding the most appropriate way of financing their enterprise. The broker community and Boost Capital should be doing more – together – to make that a reality. Asset finance and our type of short-term lending can and should work together. If we can achieve that then we will benefit, brokers will benefit, and, most importantly of all, Britain’s small business community will reap the rewards.
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