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WHY GO TO AN EXPERT ASSET FINANCE COMPANY RATHER THAN A GENERALIST LOAN PROVIDER?

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asset finance

Jon Maycock, Commercial Director, Propel Finance

 

When it comes to sourcing funding to acquire assets for your company, the end goal is to get the best business outcome. Whether that’s low repayments, flexibility, expertise or the ability to secure funding immediately, it’s important to consider all aspects of a finance solution before making a final decision.

Specific and dedicated finance is always better in practice. It’s tailor-made to a customer’s needs, helping business owners make more informed decisions when it comes to their company finances and assets. It can even be tax advantageous. Most importantly, expert finance companies don’t try and fit customer needs around a facility: they fit the facility’s needs around the customer.

However, how can a business know whether to go down this route – or simply apply for a traditional loan?

 

Potential pitfalls of a loan

Typically, loans come with a long list of terms and conditions that need to be addressed, such as the provision of quarterly management information. Alongside the huge administrative effort this invariably requires, there’s the question of flexibility; if the business isn’t using all the funds made available, it will still have to pay interest on them. With a loan, businesses are also often required to take out personal guarantees, a key consideration when compared to other forms of finance.

As such, it’s worth exploring the benefits of the asset finance route and how it can help small business owners secure the right kind of funding to meet their needs.

 

Conserving capital

Each and every asset being utilised by a business demands a payback from either generating additional income or by creating extra savings and efficiencies. Asset finance allows businesses to use the latest and most efficient assets available. By offering low-deposit funding, asset finance can help businesses conserve the working capital they otherwise would have invested upfront, allowing scope to invest in other areas of the business. Flexible repayments can be matched to budgets, trading cycles and seasonality. Fixed interest rates across the whole term ensure certainty of budgeting, vital in times of constant change.  Importantly, by using specific finance related to the assets concerned, existing credit lines, such as bank overdrafts and loans, remain untouched and are still available for business use.

Additionally, for eventualities where supplementary working capital is needed, there is also the option to refinance existing assets to generate required funds.

The security aspect of asset finance is the key differentiator when it comes to funding options. Unlike a traditional loan, with asset finance, the equipment itself acts as the security against the loan – meaning that personal collateral, such as directors’ houses, are not at risk if the business is unable to make repayments.

 

Lease over loan

Companies also have the opportunity to lease assets rather than purchase them. This means assets can generate income whilst they are being used, so can effectively start paying for themselves straight away.

As a by-product, leasing eliminates the burden of asset disposal. If the asset belongs to an asset finance provider, this puts the responsibility for disposal in the hands of a third party, with the term of agreement tailored to the anticipated useful life of the asset. And with the potential for rapid rates of corporate change and innovation, leasing provides businesses with the ability to upgrade their assets easily, without the difficulties or expense of changing a loan.

In essence, opting to lease resources removes any ongoing responsibility for funding assets once they have come to the end of their useful economic life.

 

The benefits of specialist finance

According to the Finance & Leasing Association (FLA), asset finance in new business (primarily leasing and hire purchase) grew by 6% in 2019 to reach a record annual total of £35.7 billion.

Largely, the reason behind this is the specialist sector knowledge and proficiency of asset finance houses. With an in-depth working understanding of the assets themselves, asset financers can use their expert understanding of asset values to provide specialist evaluations; and with widespread industry knowledge, can secure their customers preferential deals from established vendors.

As such, asset financing is about much more than just the cash. By capitalising on the advantages of a relationship-based funding approach, asset financiers can partner with small businesses to boost efficiency, improve performance and secure the ongoing viability of their enterprise.

Finance

THREE STEPS TO ENSURE RECOVERY OF COVID LOANS GOES SMOOTHLY

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In the wake of the pandemic, the government acted quickly to provide financial Covid support packages to help struggling businesses. With the economy now recovering, Mike Hampson, CEO at Bishopsgate Financial explores the range of options available for banks to ensure that those loans are repaid.

 

Since the start of the pandemic, businesses have raised over £75bn[1] from banks and financial markets, through interest-free emergency support schemes. But the harsh reality is that not all loans will be honoured as the economy recuperates.

As a result, banking professionals with client relationship management experience and skills in supporting clients to repay loans in a challenging business environment, will be in high demand.

 

Mike Hampson

Setting up training capabilities for client support post-pandemic

Commercial bankers estimate 60% of new coronavirus scheme loans[4] will default or suffer other repayment issues that will drive previously unseen levels of non-performing loans. It’s a tough balancing act and one that demands careful management of the lending transaction lifecycle, from origination through to collection, recovery, and handling bad debts. Banks no doubt already have frameworks in place to manage these elements, but it’s highly important to make customer interactions as easy as possible and ensure their genuine concern for their customers is clear.

Subsequently, hundreds of workers at major banks including HSBC, NatWest and Metro Bank[5] are understood to be receiving training in how to deal with vulnerable customers and “demonstrate empathy” as the first wave of repayments for coronavirus loans fall due. Staff ‘sensitivity[6] training builds on client-support and workout capabilities, such as improving sensitivity to early-warning systems, developing short-term forbearance solutions and loan modifications, and providing guidance on alternative products.

This approach may further avoid the additional pressure on the UK’s mental health crisis as financial institutions prepare to call in loans issued during the pandemic.

HSBC, which now has 400 staff in its debt collection team,[7] said the aim was to ensure staff had a “consistent understanding of vulnerability” and are “aware of the factors that could make an individual vulnerable” when having repayment conversations with customers.

An executive at another bank said its expanded debt collection team was being trained in “empathy, vulnerability and listening skills”. The individual told The Telegraph: “Ultimately, we don’t want to damage the economy by being overly aggressive.”

A peculiarity of a crisis situation is that customers don’t always know what they will need until that need is pressing. Finding that their bank is prepared to help in unexpected ways will go a long way toward reassuring them.

[2] https://www.law360.com/articles/1355897/

[3] https://www.bishopsgate-financial.com/insights/the-change-perspective/the-change-perspective-2021

[4] https://www.grantthornton.co.uk/insights/how-to-manage-upcoming-non-performing-loans/

[5] https://industryslice.com/NewsLetter/8_33

[6] https://www.telegraph.co.uk/global-health/climate-and-people/covid-19-has-amplified-parallel-pandemic-poor-mental-health/

[7] https://www.msn.com/en-gb/money/other/bank-staff-get-sensitivity-training-before-calling-in-covid-debts/ar-BB1fNMte

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FOUR STEPS TO INTEGRATING INTELLIGENT AUTOMATION IN THE FINANCE DEPARTMENT

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Marieke Saeij, CEO of Visma | Onguard

 

It’s clear that Intelligent Automation (IA) is still very much an emerging technology, with one indication being that is has only been mentioned a handful of times on Twitter since the beginning of 2021. Results from our latest annual FinTech Barometer reveal a mixed picture in terms of awareness, with half of finance professionals having never heard the term before. Whilst this is unsurprising for a technology concept very much in the ‘early adopters’ stage, organisations can stand to gain real benefits from embracing Intelligent Automation now, particular within the finance department. With this in mind, we explore some of these benefits and share a step-by-step best practice to implementing it into business operations.

 

Intelligent Automation ensures a predictable order-to-cash process

Such is the speed of introduction of new technologies that it’s a challenge for businesses to keep pace. As the newest innovation in finance, Intelligent Automation is one that organisations can’t afford to let pass by. It truly takes financial process automation to the next level. In addition to helping maintain a high-quality customer service, it also complements the existing skillset of finance professionals in the industry.

Marieke Saeij

While Robotic Process Automation (RPA) and Big Data are key innovations for the sector, IA can be likened to an additional layer that enhances existing technologies. By combining applications, this layer is capable of independently assessing situations and determining the appropriate process sequence. It can, for example, fully determine the risk of a specific customer, and can also predict at an early stage which invoices will be paid late, or even not at all, ensuring that finance professionals can then plan accordingly. The result is a reliable and predictable order-to-cash process.

 

The four steps to an IA-proof organisation

While the benefits of IA are numerous, implementing the technology can prove complex, although some are already treading the IA path without knowing it. In this instance it’s crucial to become aware and begin the purposeful process to full integration. Below are the four key steps to becoming fully IA-proof.

  1. Exploring the potential: Brainstorm where automation can be applied

Step one is to examine the extent to which automation can help your organisation. Blue sky thinking is the key here. What is the ideal relationship with the customer? What does the ideal order-to-cash process look like? In this phase, involving multiple departments from within the organisation is key, from management to operations. The finance professionals who have the most contact with customers are likely to have the strongest knowledge of which processes they would like to see automated. With no limits to ideas, it’s best to explore all the opportunities in the entire order-to-cash process and describe broadly the potential value to the organisation.

 

  1. Decipher which data and technology is needed

The second step is to map out which data and technology is required. Working with a specialist, either external or from the internal IT department, is beneficial at this stage to see where the opportunities lie. In many cases, off-the-shelf solutions are already readily available to help make the difference, so it pays to do the research and gain advice where possible.

 

  1. Firm up the strategy

With the plan mapped out, it’s time to fit the pieces of the puzzle together. Which technology and accompanying software is proving most valuable? It’s vital at this stage to analyse the results the organisation is achieving from deploying the right technology and software. It’s also important to outline any limitations and emphasising the potential risk of failure. This is the business case and the basis for the elevator pitch that will be presented to internal stakeholders.

 

  1. Draw up the roadmap and start benefitting from agility

The fourth and final step is prioritisation. The roadmap will describe step-by-step how to move from the undesired current situation to the desired end goal. In the first step, choosing a subproject that is relatively easy to achieve will help gain support from other departments within the business, and provide invaluable experience that can be applied to the more complex components that follow later. This agile approach facilitates a learn-by-doing mindset and allows the following steps to be tackled in a smarter and simpler way.

 

Effective preparation is half the battle

Exploring the potential of automation, mapping the required data and technology, establishing the strategy and laying out the roadmap are the four crucial steps to ensure the foundation for Intelligent Automation. Effective preparation and estimating which technology and accompanying software is needed will help to create a streamlined and error-free order-to-cash process. To ultimately save time and costs, empower finance professionals and maintain customer loyalty, the time for Intelligent Automation is now.

 

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