| ASSET FINANCE THE KEY TO ECONOMIC RECOVERY |
 FOR IMMEDIATE RELEASE MARCH 2011
ASSET FINANCE – THE KEY TO ECONOMIC RECOVERY Alexander Baldock, Managing Director
The economic recovery in the UK will be driven largely by small businesses which are the heart of any mature economy. A significant boost to capital expenditure is desperately needed by SMEs in order to stimulate this recovery, and this is where lending more in the form of asset finance can be hugely beneficial.
The flexibility of asset finance can make it vital to unlocking cash and powering growth but is often only seen as a means for businesses to fund acquisitions. Mechanisms such as sale and leaseback can help companies that need to unlock the capital contained in a business asset, such as a fleet of vehicles or a suite of IT. The finance provider can simply purchase the asset from the customer and lease it back at a reasonable rate, releasing the capital which can then be re-invested appropriately within the business.
As we look to exit the recession, the UK asset finance industry has a significant role to play in stimulating and supporting business growth. As one of the UK’s leading providers of business asset finance, Lombard is committed to communicating the advantages and flexibility of asset finance to SMEs to help the sector realise its growth potential. Our challenge is to help businesses understand the benefits of considering alternative methods of acquiring key assets.
Many small companies will be familiar with asset finance for cars and vans but may not realise that the same funding mechanism can also be used for other asset types. They may choose to fund business assets such as technology or machinery with an outright, upfront cash purchase, without realising the potential impact this may have on their company’s financial stability. Without this cash in the bank, is the company prepared to face an unexpected change in market conditions, or a severe depreciation in the asset value? Will it always have the financial reserves to cope, whatever the economic weather?
A key challenge is the SME sector’s cultural view of asset finance. There is a common perception that committing to a financing solution involves becoming ‘locked in’ to a long term debt owed on an asset that will just depreciate in value, leaving the business with a greater debt owed on the asset than it is worth. The reality is that different forms of financing will suit different types of assets, and an intuitive funding provider will ensure that its client benefits from a deal that is structured around their particular business needs. Residual value investments can offer economic costs for the duration of the lease.
Conversely some businesses, particularly within the manufacturing sector, will view longer life assets such as plant and machinery as better suited to upfront ownership. These assets are more durable and hold their value for longer, thereby proving a worthwhile investment for the business. But if the business has decided to invest capital in its machinery upfront and own it outright, in fast moving sectors where manufacturing technology develops at a rapid pace, it will soon be left behind. By using asset finance as an alternative acquisition solution, the factory can actually future-proof its investment as it provides the flexibility to update the production line as and when the latest technology is released.
The benefits of different forms of asset finance to an SME are really just the tip of the iceberg in terms of the potential it provides to grow and develop a business, even in the most challenging economic times. Asset finance is an additional, committed line of credit that can be tailored to match a specific contract or business depreciation policy. The range of facilities available not only allows for individual cash flow requirements but can also enable the financier to take a true risk in the future value of an asset to maximise the cash it generates. This flexibility will enable businesses to do more with less, to expand into new markets, to recruit and develop more valued staff, and to ensure a much-needed future of prosperity for our economy.
ENDS
About Lombard As one of the largest asset financiers in the UK, Lombard North Central PLC provides various forms of asset finance to businesses of varying sizes – from SMEs to large corporates. Products include Hire Purchase, Finance Lease, Operating Lease, Sale and Leaseback, Contract Hire, to Contract Purchase, as well as multi-specialist asset finance products such as marine, aviation and specific wholesale and stocking funding for distributors and dealerships.
Celebrating its 150th anniversary in 2011, Lombard North Central PLC is headquartered in Redhill, Surrey, with an extensive network of business centres situated throughout the UK, and is an appointed representative of The Royal Bank of Scotland plc, which is authorised and regulated by the Financial Services Authority.
For more information contact: Karyn Theron, PR & Communications Manager, Lombard +44 771 780 7092 This e-mail address is being protected from spam bots, you need JavaScript enabled to view it |