Asset finance is playing an increasingly important part in many businesses, providing the funding needed to purchase the equipment, machinery or capital that helps to facilitate growth. Last year, the sector saw significant growth, which looks set to continue over the coming 12 months despite the uncertainty surrounding Brexit and rise of new technologies and alternative finance platforms. Here, Rory Dunn, managing director of Portman Asset Finance, looks at the key influences for the industry this year.
The economic landscape
No industry is immune from the uncertainty of Brexit, and most businesses will have contingency plans in place for whatever outcome. In some cases, this means investing in the business to stay ahead of their competitors, weather a downturn, or make the most of new opportunities in the market.
From our experience, we have found that there will always be strong demand in the asset finance sector, regardless of market conditions, as many businesses require investment for consolidation or growth.
The implications of Brexit are not yet known, but we are confident that out of the confusion will come opportunities. In the case of a ‘soft’ Brexit, we will most likely see business as usual, with companies seeking out investment for equipment at a rate that has been experienced for the last 12 months. If the uncertainty continues or the UK leaves without an agreement, finance companies may still see a rise in demand, especially from firms that export and import goods in need of a financial injection to see them through the temporary uncertainty.
People investment
A forward-thinking asset finance provider will always look for the most dynamic candidates to support its continued growth, in every area of the company. Whether this is in a sales position or a service support role, firms should be on the look out for the best talent or experienced experts to focus on improvements to their offering. While companies outside of major cities may believe they’re at a disadvantage, this is not always the case. Recently, we have noticed a shift among skilled brokers moving away from London as they search for more desirable living costs and standards.
Understanding demands
No matter what the year brings, one of the most common barriers to business growth is access to affordable and flexible finance options. The level of demand reflects this – over the last year Portman Asset Finance has seen an increase of 320 per cent in finance enquiries and a 35 per cent rise in the amount of finance arranged for businesses.
In 2019, I believe that the most successful asset finance firms will be able to understand the complexities of a lender’s demands and supply investment to sectors that are stagnant or in a current state of decline. With ongoing economic confusion, the number of sectors facing difficulties could rise, which may mean a higher demand for asset finance in the future.
Technological feats
The last few years have brought about significant developments in financial technology and with this, lenders have started to change their attitude towards disruptive fintech businesses entering the market. While these businesses can cater to a larger number of proposals, conversion rates for more traditional lenders appear to be much higher.
With the challenge of fintech businesses, established firms now have the opportunity to refocus their efforts, and bring a personal touch when dealing with customers. Directors should concentrate on understanding the client’s requirements and how they can fulfill them by delegating to dedicated and knowledgeable account managers. Firms should now be adapting technology into their processes so they can integrate and automate their financial and security data. With this, they can improve efficiencies and reduce the risk of fraud from their lenders
AI monitoring
Artificial intelligence (AI) and predicative analytics will continue to drive change to influence the invoice finance sector. With this technology, firms can now monitor a client’s financial position – after gaining their approval – and take a proactive approach to support cashflow.
This means lenders will be able to contact clients before they run into cashflow issues. Whereas previously, companies would search for invoice finance when there was an issue and they needed immediate support. In a state of emergency, owners and managers were more likely to make rushed decisions, and accept deals with higher interest rates.
This new technology, now being utilised by Portman Asset Finance, can intervene before the additional finance is needed, ensuring the client finds the best investment for them at the right time. In 2018, a survey of 1,000 UK SMEs – commissioned by The Prompt Payment Directory – discovered that 50 per cent of SME owners had been on the edge of bankruptcy due to late or outstanding invoice payments. 63 per cent admitted that late payment issues resulted in not being able to pay themselves at the correct time, and 20 per cent had delayed payment of staff.
Problems with cashflow cause a great deal of anxiety for business owners, but using technology that tracks any late payments can reduce this stress and free up directors to focus on running their business.
In our business, we have worked hard to integrate technology while also focusing on the personal side of the service so that we can protect our core business values. Digitalisation will not replace face-to-face relationships, knowledge and skills, so it is important for finance firms to retain human interaction.
For more information on Portman Asset Finance, visit www.portmanassetfinance.co.uk.
