Can financial services groups boost overall sales by bringing asset finance closer to other commercial lending?

With the worst months of the recession having thinned the glut of low-risk deals once available in Europe, any lessor now relishes the prospect of fresh business with customers who are known to be of good quality.

For leasing companies which sit alongside other commercial finance units inside a larger family of businesses, a shrewd channel strategy at group level can leverage the sales of other divisions to boost asset finance performance, and use leasing relationships as a platform to sell other products.

Cross selling is no new concept, but 2009 seems to be seeing a marked trend for many financial services groups to integrate asset finance sales into a broader strategy aimed at selling a ‘solution’ rather than individual products.

Close Brothers Ltd, for example, began on August 1 to merge its Invoice Discounting and Asset Finance businesses into a single legal entity, under the banner of Close Commercial Finance. In time, CCF will also provide ancillary services such as foreign exchange through the support of embedded expert staff.

“Our aim, in addition to our traditional specialist lending activities” said Close Brothers director Mike Barley, “is to offer our SME customers an integrated one stop shop to meet all of their financing needs. Increasingly, we will be offering an integrated proposition to business introducers and customers”

In practice, the move will involve a weighty training programme for staff on both sides of the integration. This will be aimed at promoting recognition of customer need for invoice discounting in an asset finance relationship, and vice versa.

The integration is also expected to increase asset finance business introduction through professional services. Currently, invoice discounting business is regularly sourced through contact from SME accountants, and Barley hopes that by offering asset finance through the same organization as invoice finance, that particular channel will widen.

The UK’s largest banks are also in on the trend – HSBC Equipment Finance (HEF) already does 75 percent of its business with HSBC banking customers, and has embraced sales integration, not just as a mechanism for efficiency, but as a central part of a plan for rapid growth.

At the core of HEF’s expansion through the sales base of its parent is its structured finance team, which offers a much more holistic product (again, a ‘solution’) than just an isolated lease or contract hire.

Barclays Asset & Sales Finance, even more than HSBC EF perhaps, has set its sights on integration into a wider commercial finance operation. One of the fastest growing areas of Barclays Commercial Bank, BA&SF now operates effectively “as one team” with the rest of BCB, says asset finance head Alex Brown.

Within Barclays Commercial, he explains, there is no incentivisation linked to the sale of any particular product: “Our sales mechanism is all about selling the right solution to the customer. There are no product specific targets and we work closely together within the various teams.”

In addition, says Brown, the integration has proved “critical to continued safe lending” by collating risk information on customers. “We have achieved one ‘Risk’ view of the customer in Commercial Bank as a whole, giving us a new level of transparency and support to our customer base. Our interests and security should be cross collaterised, protecting all our interests.” He comments.

Prue Heron, director of recruitment company Commercial Finance People, says that integrating asset finance into a wider commercial finance offering avoids potential missed opportunities by specialists working in isolation, as well as offering economies of scale through staffing consolidation.

“In addition, from the customer’s viewpoint, this reduces the number of provider visits and ensures that an overall view is taken of the business. Products and services which complement each other are provided, to the benefit of the business.”

However, she warns, consolidation is not without its drawbacks: “In our experience, where organisations rely on one person to identify the need for, and sell the benefits of, a variety of commercial finance products, it rarely meets with success.”

“The knowledge and skills required for the identification of opportunities for the sale of asset finance, invoice finance or commercial banking are as different as the training and qualifications required for each of these sectors. They are all highly specialist areas and, whilst candidates do transfer between these sectors, it is only normally during period of candidate shortages when full training and shadowing is available.”

If a healthier economy presents itself next year, these multi-tasking lessors will have a chance to show how their adaptations to a sparse sales outlook perform in a less demanding market.

Contributed by Fred Crawley – Reporter, Leasing Life & Motor Finance – Leasing Life

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