The deal is an extension of the existing arrangement between the companies in the UK, in which the Berkshire-based company acts as one Sony’s vendor finance partners.

Peter Savage, managing director of Azule, said the German market had been crying out for a broadcast leasing specialist.

Azule’s relationship with Sony FS began in 2008 when it was asked to provide a specialised broker network for Sony FS’ UK leasing program.

Savage said Sony FS is now writing three times the amount of business it had been doing at that time, and considers his brokerage to have played a major role in this increase.

He said the success of the UK programme had prompted Sony to commission Azule to review the German market.

“Azule approached Sony with a proposal to carry out an analysis of the German market,” Savage commented.

“We did, and identified a number of German lessors that it would be advantageous for Sony FS to have in their portfolio for broker-style introductions. We then launched in September.”

Michelle Simpson, programme manager for Sony FS, said Sony wanted to enhance its existing lease offering with De Lage Landen by introducing a dedicated media and broadcast broker model alongside it, and said Azule’s network and sector understanding made it perfectly positioned to provide this.

Savage believes it is Azule’s experience and knowledge of a specialist sector which has allowed it to be one of the first UK brokers to successfully break into the German lending market.

“We’ve been warmly received by the German market; they recognise the fact the UK has got something they’ve been wanting for along time – a specialist in broadcast and media,” he said.

“In the broadcast market the UK is probably ahead of the rest of Europe in terms of the maturity of the leasing market so a lot of manufacturers are doing things in the UK they are unable to do elsewhere in Europe.

“Germany is a similar sized broadcast market and therefore is suitable for similar leasing deals.”

Azule and Sony FS’ German partnership already has its first deal proposal underway.

Article contributed by Fred Crawley, Editor – Leasing Life

These were the words spoken by Chris Sullivan, chief executive of corporate banking for RBS in the UK, at a conference held recently by systems provider Sword Apak.

The comment was made in a discussion on the future of manufacturer finance programmes, in which Sullivan expressed his expectation that the majority of manufacturers would soon need to partner with banks in order to achieve access to capital at a sustainable price.

He argued that the cost of funding would only increase in the years to come, putting margins under pressure and forcing manufacturers either to think like banks in terms of the management of their treasury functions, or enter into risk-sharing partnerships with banking partners in order to provide both wholesale and retail finance.

Speaking exclusively to Motor Finance, Leasing Life’s sister title, Sullivan explained: “Of course, every set of circumstances is unique and a generalisation can’t be made. However, banks are increasingly acting as both advisors and funders to manufacturers, and even when manufacturers are providing finance themselves, it is likely that they are borrowing from a bank to fund that lending.”

Colin Maddocks, director of network development for Mazda Europe, agreed that manufacturers had to begin thinking about more than just “moving metal” in their provision of finance programmes.

“In working with bank partners across Europe, we have had to think about cost and profit implications for them – so we have learnt to think like a bank,” Maddocks said.

Change expected

Across the industry, business leaders have responded to the issue with unanimous agreement that captive strategy will have to change to reflect shifts in the capital markets, but have stopped short of sounding the death knell for the traditional captive model.

Black Horse managing director Chris Sutton commented: “Money costs are undoubtedly going to rise in the short term to counteract inflation, as economies continue to recover and money supply stimuli reduces. Manufacturers have been particularly active in supporting sales of new vehicles by providing subsidised finance, but as interest rates rise, this becomes increasingly expensive, especially around provision of zero/low rate APRs.”

Sutton contended, however, that manufacturers need not necessarily be at a disadvantage to banks in terms of access to capital. Traditionally, Sutton argued, banks have had the ability to raise funds to lend out at lower rates than major corporates, but that this had changed as the risk premiums attached to financial institutions had increased in recent years.

“Some corporates can now raise funds in their own right more cheaply than via their bank – depending on the strength of the balance sheet,” he said.

“Since the credit crunch, the importance of liquidity and availability of capital is now much more apparent for both banks and manufacturers. With any joint arrangement the profit element is usually required to be shared, which can place pressure on the margins needed.

“Personally, I believe that we will still see both models in operation in the future – some manufacturers will want, or need to, rely on banks to provide funding and some will be able to raise their own funding by other means.”

Adapting for survival

Meanwhile, consultant and former head of Mazda Bank, Ian Dewsnap, agreed that there would be ways for the current captive model to survive into the future.

“I would not for one minute argue with Darwin. Evolution is constantly going on, and the only constant is change – or whatever expression you care to use. However, I would not buy the argument that captives are dead for a while yet. To answer the question of how they will change, however, one needs to look beyond the UK.”

A dry securitisation market, poor access to funding and consequent higher operational costs, Dewsnap posited, had made some smaller markets no longer viable for single brand “true” captives.

He explained: “Creative solutions have emerged, with some manufacturers taking back ownership of wholesale and moving their point of revenue from wholesale to retail. Some have set up white label operations, others perhaps JVs.

“Certainly the landscape has changed, and the days of the captives in every market their parent brand operates in are gone.”

The survival of wholly owned captives, Dewsnap said, will depend on both the motives and the financial positions of their parents. The German captives in particular, he argued, had particularly strong treasury operations, and might prosper “for a long while yet.”

At the same time as these comments were being made, one German-owned captive – BMW Financial Services – made a muscular demonstration of its group’s confidence in its profit-making ability by completing the acquisition of ING Car Lease by fleet subsidiary Alphabet.

It was certainly enough to cause fleet provider Leasedrive’s commercial director, Roddy Graham, to re-evaluate his view of the viability of the captive model.

“Until last week, I would have agreed with the view that partnership with banks will become the only realistic way for manufacturers to offer finance programmes. However, the news that BMW has acquired ING Car Lease for a not insignificant consideration, and the fact that they will need to feed the business ongoing with a huge level of asset finance, suggests that this particular captive is alive and well.”

If, then, the captive model still has life in it, what will be the next phase of its evolution?

Dewsnap thinks that the situation may change dramatically once Chinese brands start to develop momentum in Europe.

“As and when the Chinese brands have a market share foothold, it will be interesting to see what their decision might be for the use of what seems to be plentiful capital access. Will they partner with existing players, bring Chinese banks with them as partners – or set up their version of the traditional captive model in larger markets?”

While few would disagree that those manufacturers who have chosen to ally themselves with banks will have an advantage in preserving their margins in a pricier funding climate, it remains to be seen whether truly in-house funders will fall foul of their traditional methods, or find new ways to compete.

Article contributed by Fred Crawley, Senior Reporter – Leasing Life & Motor Finance

Just 8 months out of bankruptcy protection, American lender CIT has posted stronger-than-expected Q2 profits of $142.1 million, on $1 billion worth of new business.

It has secured 2.5bn of new funding globally since January, including an unprecedented £100 million facility reserved for UK vendor finance, as well as repaying nearly two thirds of its high-priority debt.

What all this means for its leasing competitors in Europe is that, if they weren’t figuring an active CIT in to their mental view of the market ahead, they should be doing so now.

Back in the game

Speaking exclusively to Leasing Life, the company’s global head of Vendor Finance, Ron Arrington, said that CIT was “aggressively out in the market”, with a view to increasing business.

Arrington has good reason to be bullish – his vendor finance division is occupying a more prominent position than ever within CIT, after 2009 saw the company sell or reorganised wide swathes of peripheral business in order to focus on its most profitable segments.

The total volume of VF business written during H1 2010 was down year-on-year in absolute terms, but occupied a significantly higher proportion of CIT’s total lend than it did a year earlier.

Furthermore, this prominence looks to increase – of $2.5 billion in funding secured so far this year, some $1.8 billion is earmarked specifically for Vendor Finance.

One particularly interesting component of this is a £100 million conduit facility closed in London and destined for the UK arm of the business, the first such facility that CIT has arranged outside North America.

For players in the UK IT vendor finance market, many of whom have been very busy in pushing into the gaps left by CIT’s recessionary troubles, this is a clear signal that their old rival is back in the game.

Getting the model working

There is still some way to go, however. For CIT, success has always meant borrowing money cheaply and lending it at a higher rate – a strategy that left it in such trouble when cheap capital vanished from the market in the aftermath of the credit crisis.

To get the model working again, CIT has two major challenges. The first is to gain access to new and inexpensive sources of liquidity, a cause which the healthy $2.5bn of credit facilities closed so far this year would seem to support.

Arrington says Vendor Finance has closed nearly $2 billion in funding facilities since the start of the year, adding “as we look to continue diversifying funding sources, liquidity is not under pressure.”

CIT’s second challenge – to reduce the cost of debt repayments in the aftermath of Chapter 1 – is also being tackled at a rate that has shocked many analysts.

Some 4.5 billion of the group’s first lien debt has now been paid back, comprising 60 percent of what CIT came into 2010 with. The balance, meanwhile, has been refinanced at a lower cost.

“The diversification of funding and the actions the company has taken to pay down our higher cost debt is helping the margins in our business” said Arrington.

In order to help repay debts, CIT has sold off just 5 per cent of its total balance sheet in the last year, including over $1 billion in corporate finance and student loan receivables and a joint venture with Canadian lender CIBC.

Also divested was CIT’s equipment finance business in Australia and New Zealand, a decision that Arrington said was made “to reduce exposure to the consumer lending market”.

More than just price

While CIT’s core funding model returns to health, CIT’s Vendor Finance division in Europe will concentrate on profitable sales aid leasing, primarily in the IT, Telecoms and Office equipment markets. 

Arrington commented that, while customer investment appetite remains “somewhat muted” in these sectors, the constant need for businesses to replace and upgrade high-tech assets had incurred a healthy level of demand for finance.

The relative health of these sectors poses its own challenge to CIT, however. Many UK and European lessors, also noticing the opportunities to be had in technology finance, have been prospecting the arena for vendor schemes of their own over the last two years. 

CIT will face stiff competition from these peers as it carves out a larger space in the market, but Arrington is confident of his division’s “strong value proposition” in Europe – despite the fact that it will still be limited in its capacity to drive down prices.

“Our value proposition goes beyond price” said Arrington, referring to a “best in class” service offering involving recently upgraded CRM systems, a strong level of contact with vendor partners, and high flexibility in supporting different resellers’ various routes to market.

Healthy Tension

In a sign of its increasing appetite, CIT last month began transacting business through a new vendor programme with fast-growing PC manufacturer Lenovo.

In addition to seeking out new relationships such as this, Arrington’s division will be turning its attention to “maximising business” within existing programmes – news that will be music to the ears of partnered resellers looking to achieve more finance sales.

Will it be difficult to balance reseller’s demands for greater conversion of finance proposals with the need to ensure healthy returns through selective credit control?

“In good times as well as bad,” says Arrington, “there is always a healthy tension between credit approval rates and new business volume. We will continue utilising our best in class credit scoring models, and also the expertise of our people – they know our resellers and their customers’ businesses really well and this helps ensure prudent lending.”

Overall, Arrington is optimistic that CIT’s reputation for global reach and service provision, together with the decisive steps it has taken towards redressing its financial situation, will give it what it needs to push ahead in a high-pressure IT finance market – “We will be a key player, and we will be a global player.”

Will CIT regain the place it occupied before the onset of the credit crisis? Arrington’s answer is simple – “ We’ve made tremendous progress so far”

Article contributed by Fred Crawley, Senior Reporter – Leasing Life & Motor Finance

VRL — Analysis, insight, intelligence

First up, AIM-listed Ultimate Finance, whose new venture, Ultimate Asset Finance (UAF), is to be led by Andrew Ribbins, one of the key figures behind combined lender/broker Voss Finance.

Voss, incorporated in 1995, remains active in leasing to SMEs, with a focus on plant and machinery assets. It is a niche lender with a risk pricing model towards the higher end of the spectrum, and yet has suffered virtually no bad debt over the course of the recession. Write-offs only arose from the multiple finance controversy surrounding plastics manufacturer Global EPP – an issue that affected most of the UK’s lessors.

High level of control

Coming from this background, Ribbins will build a relatively small operation at UAF, lending in the single digit millions within its first year and keeping a high level of control over quality of deals.

In the months to come, UAF will move into a new office, which will also house a new regional division of Ultimate’s mainstream business.

Deals will be sourced initially from Ribbins’ own contact book, and from Ultimate’s invoice finance customer base.

Yet, while Ultimate Finance accepts business from intermediaries in its mainstream invoice finance business, its new asset finance subsidiary will not be doing so until it has built up its funding base further.

Currently, UAF has secured funding lines with Siemens Financial Services and Singers Corporate Asset Finance.

Ultimate, which has offices in Manchester, Bristol and Tunbridge Wells, also launched a trade finance business in March – another example of the company’s holistic approach to commercial finance provision.

Furthermore, the future looks comfortable for the group, with the half-year leading up to 31 December 2009 seeing Ultimate make a pre-tax profit of £191,000 (€232,000, up from £140,000 a year earlier) despite a turnover reduced from £2.2 million to £2.9 million.

While UAF will not be rubbing shoulders with the giants of UK leasing any time in the near future, its foundation represents another point in favour of the school of thought which says that asset and invoice finance can work better when under the same roof.

Asked whether there had been any difficulties in providing leasing through Ultimate’s wider sales force, who have traditionally sold invoice finance, Ribbins said: “I don’t think it is too tough to cross train for hire purchase and leasing sales.

“This is a highly professional sales force, and they know how to look at a customer balance sheet, which is fundamental to both product sets.”

“Considering that our leasing product is not too complicated, I think it will be straightforward to spot opportunities for sale and leaseback, for example, with customers looking to acquire cash by factoring book debt”

Meanwhile, another lender with the ability to provide both invoice finance and leasing products is Southampton’s State Securities. The company celebrated the 30th anniversary of its incorporation last month and predicts a promising future in lending across multiple product lines.

Best first-quarter sales

According to sales director Barry Hutchings, who joined State in November 2009, the company has seen its best first-quarter sales total in two years, and during the first half of 2010 expects to double the amount of business it signed during the equivalent period in 2009.

By the end of the year, Hutchings says, annual new business volume is targeted to reach 250 percent of the 2009 total – a dramatic return to form for the subprime specialist.

Another return to form for State could be in property lending. Having withdrawn from the commercial mortgage market over two years ago, the company has only undertaken property loans to support other lending requirements, with standalone commercial mortgage opportunities avoided.

This situation is under review, however, with commercial mortgage products looking likely to once again form part of State’s core offering through brokers. Heavily involved in this discussion will be Graham Jacobs, the property expert who joined State in 2007 after helping the company to secure its new premises.

Hutchings also sees potential for State to grow through its invoice finance offerings. “We do see a particularly strong opportunity to grow our factoring business,” he said.

Hutchings added: “We will continue to produce innovative financing solutions for customers with more challenged credits, including refinance and turnaround finance buy-outs, which a growing number of SMEs require and for which we are renowned.”

More good news

Finally, more good news has come from Microlease, the UK-based (but increasingly global) test equipment lessor with backing from LDC, the private equity arm of the Lloyds Banking Group.

The company’s revenue for the year leading to 31 January totalled £30 million, considerably up on last year’s figure of £23 million, with earnings before interest, taxes, depreciation and amortisation up from £10.6 million to £13.6 million over the same period.

The results represent the fourth year in which Microlease has exhibited more than 30 percent growth, following the management buyout which saw current CEO Nigel Brown take control of the business in 2006.

Despite its name, Microlease is as much a dealer of high-precision test equipment as it is a lessor of such kit. However, according to Brown, it is the offering of financial products, including both long-term leasing and short-term rental, that has really powered growth in the last year.

To see how well the company integrates leasing into its general equipment sales, one only has to look at the authorised technology partner arrangement Microlease has had in place with manufacturer Agilent since November last year.

As a result of this programme, Microlease is now responsible for the lion’s share of Agilent’s sales volume within the territories of the UK, Ireland and Italy, and has been offering a full suite of financial products alongside the Agilent equipment range.

For the first half of the year, says Brown, leasing penetration rates in the Agilent ATP programme was only 8 percent. By the end of the year, however, 36 percent of programme sales were being conducted through leasing of one kind or another.

Microlease has also observed a significant shift in the sectoral uptake of leasing services, with the aerospace and defence industries growing much more receptive to acquiring assets on lease – a trend Brown thinks will continue as the government customers of defence contractors suffer budget cuts in the years to come.

In 2006, the telecoms and R&D industries provided 90 percent of Microlease’s financial services business – now, the defence sector contributes an equivalent volume.

According to Brown, LDC, Microlease’s private equity backer, is “very happy” with its investment in the company, having backed its acquisition of the European operations of US competitor Telogy in September last year. The financial support also helped put Microlease in a position to acquire long term funding lines with RBS and its asset finance subsidiary Lombard, Brown said.

Keen to invest further

He added “I am confident that, if we needed more funds to make further acquisitions, LDC would be keen to invest further”, but confirmed that there were no acquisitions currently being directly pursued.

Microlease recently attempted to acquire an American business that had filed for Chapter 11, but did not win the bid. The target company was eventually sold for $26 million (€21 million).

Looking forward, Microlease expects revenue to increase from £30 million to £50 million over the 2010 financial year, with earnings before interest, taxes, depreciation and amortisation rising from £13.6 million to £18 million.
Article contributed by Fred Crawley, Senior Reporter – Leasing Life & Motor Finance

VRL — Analysis, insight, intelligence

Image copyright: Flickr

Fred Crawley and Brendan Malkin report on these overlaps in asset based lending and asset finance  and the opportunities they pose to finance companies.

Andrew Bullard hardly has a spare moment these days. Ever since he took up his position as head of business at Cashflow UK Limited, an invoice finance brokerage, he has spent much of his time travelling around Britain, meeting customers and catching up with business partners. On most weeks, he spends just two days at his offices in Eastbourne.

There is good reason for all this activity. As well as wanting to significantly increase the number of deals Cashflow UK brokers, he also wants his company to return to the number one spot it held in the factoring intermediary sector before it was bought by Bibby in May 2008.

One way he wants to achieve this is by sharing more business with asset finance brokers.

This works by what Bullard calls a process of “reciprocity”: Cashflow UK forwards leasing deals to leasing brokers, which in return pay Cashflow UK a commission for each deal assigned; in exchange, lessor brokers give Cashflow UK their factoring and invoice discounting deals.

Mark O’Neil, joint managing director of Vantis’ Commercial and Asset Finance division (VCAF), thinks that this is a good idea for the industry. VCAF introduces both invoice finance (IF) and asset finance (AF) business, and is aware of how different the two funding markets are.

Focusing on the differences

For a start, much more is going on in invoice finance – O’Neil says there are between 75 and 80 active funders in the market, with at least three new ones (Team Factors, Innovation Finance and Partnership Finance) emerging in the last six weeks alone.

In addition, without wanting to make the asset finance market look commoditised, variance between IF funders comes down to a lot more than rates.

IF is an “evergreen” product – where payout is continuous and the agreement has no fixed term – and according to O’Neil, “the wrong client matched up to the wrong funder can cause big problems later in the relationship”.

As such, deals are much more likely to satisfy both parties in the long run if they are introduced by a broker with a wide range of IF funder contacts.

Reciprocity schemes such as those operated by Cashflow UK mean that AF brokers can be sure of clients’ IF applications reaching appropriate funders, rather than all being fed through one or two invoice financiers that the broker happens to know.

Cashflow UK is not alone in being open to IF proposals from lease brokers, either.

Hilton-Baird (HB), the current leader of the invoice finance broker market, is a firm that is taking a greater and greater interest in asset finance.

HB managing director Evette Orams says that co-operation between AF and IF introducers is certain to increase in years to come, and HB has placed plenty of IF proposals sourced from asset finance brokers.

Orams reinforces the importance of getting the right funder for the right deal, and explains that HB’s standard practice is to introduce a proposal to two or more funders, in order to ensure the right fit.

Unlike most lease brokers, HB does not ‘package’ deals for underwriting – it simply introduces opportunities to lenders, making multiple introductions more feasible.

Interestingly, HB has also begun to pass on some asset finance requests from IF customers to funders it knows in the AF sector. Since these deals tend to be those for which HB cannot find an appropriate ABL solution, they tend to be fairly specialised, and thus placed with firms employing committee rather than “scorecard” underwriting.

Also, and interestingly as a potential source of commission to AF brokers, Orams says that HB can often find an ID or factoring solution to a customer request for asset finance.

This means that for brokers with equipment proposals that are difficult to place in today’s limited funding world, it might be worth speaking to an IF broker like HB to see if an “asset-based” resolution can be found instead.

Finding a new niche

Other brokers back in asset finance, meanwhile, have embarked upon a similar course of consolidating on the overlaps in the leasing and factoring markets.

However, rather than offloading deals that are not core to their business, these brokers instead are seeking to bring together finance products.

The reason for doing so is simple. While the recession, on the one hand, has meant companies are deferring their investment in capital expenditure, on the other it has given rise to a proliferation in refinancing requirements.

Structured products that might include a mix of asset finance and factoring can help fulfil these demands.

Some brokers have embarked on an aggressive push to attract these types of deals, and in doing so have effectively re-labelled themselves as turnaround specialists.

Norton Folgate, for example, has just launched an ABL offering, aimed specifically at restructuring situations.

Managed personally by managing director Robert Keep, the new product set is designed to bridge the gap between traditional asset finance and more complex corporate finance transactions involving equity as well as debt.

Among the tools Keep intends to deploy for this purpose are not just asset and invoice finance, but receivables finance, inventory and stock finance, debenture-backed term loans, commercial mortgages, chattel mortgages and access to a special “corporate rescue” fund.

Jumping on board

Bullard made clear that there are other brokers looking to enter the turnaround space.

“There are more Phil Betts-type people wanting to get into the marketplace,” said Bullard.

Bank-owned leasing companies have also not been blind to the benefits of bringing their asset finance and factoring businesses closer together.

Barclays did this some years ago when it formed Barclays Asset & Sales Finance, and ING Lease Group followed suit back in late 2007.

Last month, La Tribune, the French newspaper, reported that Credit Agricole was merging its leasing and factoring operations. Many others are doing the same.

Other brokers, too, are finding ways to capitalise in the new leasing-factoring revolution.

The leasing-factoring alliance, however, is still in its infancy, and there remains plenty of room for growth.

Bullard says around 10 percent of his business comes from sharing leasing deals with asset finance brokers, but he expects this to grow to 30 percent in the medium term.

“We’ve recently forwarded two vehicle deals and two hard asset deals to asset finance brokers, but there is plenty more we could be doing,” he says.

Article contributed by Fred Crawley – Senior Reporter, Leasing Life & Motor Finance

Image copyright: Flickr

Since its formation through the merger of Base Commercial Mortgages and asset finance lender Ruffler bank by private equity house AnaCap in June 2009, Aldermore has certainly been busy.

September 2009 saw the addition of Absolute Invoice Finance to the bank’s balance sheet, while steadily increasing panels of brokers in both asset finance and commercial property divisions have ensured growth despite an extremely quiet winter for the industry as a whole.

Most recently, the purchase of Heritable Asset Finance’s portfolio at the start of March saw around £35 million added to the Aldermore pot, virtually doubling the bank’s lease book to make up a quarter of its total assets.

The next step

All very impressive, given that Aldermore’s IT infrastructure for asset finance is not yet finished. Division head George Ashworth oversaw the completion of its first phase last month, allowing back office support for the bank’s current sales model.

This model is aimed at financing “hard” assets with good resale potential in the event of a customer default, in sectors such as construction, materials handling, agriculture and manufacturing.

At the moment, deals with a value of £100,000 form the majority of Aldermore’s asset finance lending. “However” says Ashworth, “with the next phase of the IT build, we can start to bring down deal value, and support a smaller ticket business.”

This expansion into smaller-value, higher-volume business will support Aldermore’s development of broker-led business, a policy which Stephens says applies across the bank, in invoice discounting and property lending as well as in asset finance.

Casting the net

Currently, Aldermore uses a panel of 28 asset finance brokers, and is in a position to consider further introducers. In commercial property lending, for example, the bank is adding four or five companies to its intermediary roster each month.

Beyond broker business, the new IT system will provide Aldermore with the means to make significant moves into the vendor finance space. At the moment, Ashworth’s division manages a handful of sales aid programmes, but it will soon be capable of developing new ones and accepting schemes introduced by brokers.

While asset finance business has been centralised at Aldermore’s head office in Peterborough until now, a network of business development managers (BDMs) is being put in place in order to give more comprehensive regional coverage.

These BDMs will work from the same locations as Absolute Invoice Finance, which came into Aldermore’s possession with a fully fledged network of regional offices. This congruence, says Stephens, will not just be physical. Cross-selling is central to Aldermore’s strategy, as one would expect from a company formed from lenders in three different fields of finance provision.

First on the list

From here on, Aldermore’s strategy is unambiguous. “Our overall strategic objective is to be recognised as a bank providing first class service” says Stephens. “We want to be one of the first names on any SME’s list when it comes to acquiring equipment in an asset class we support, such as materials handling.”

The way to achieve this, in the opinions of both Stephens and Ashworth, is for Aldermore to identify further markets of interest and make rapid progress in building a name in them. For an example of this strategy, one need only look so far as the move into the Professions finance market through the purchase of HAF.

For now, Aldermore’s greatest strengths are the speed at which it can make decisions, and the liquidity – albeit not limitless – with which it can back them up. If it can keep such tight lines of communication as it takes on more staff and more business, its name will be heard more and more often in UK leasing.

Article contributed by Fred Crawley – Senior Reporter, Leasing Life & Motor Finance

Last month, Leasing Life  reported on growth plans from WestWon Capital, Associated Commercial Finance, Capital Solutions Group, and Premier Asset Finance, an outfit comprising ex-Bank of Scotland (BoS) sales veterans.

Now, another broker formed in the aftermath of BoS’ withdrawal from the transport and logistics market has signalled its ambitions.

T&L Leasing is a specialist broker – possibly the only one of its kind – working in the field of heavy commercial vehicles.

After launching in January 2009, the first year of trading for the Chester-based introducer saw more than 1,000 vehicles financed via 150 deals with 10 lenders, most of which are based in Europe and the Middle East.

So far, T&L has almost entirely worked with customers and suppliers known from the BoS era, in addition to clients introduced from that pool.

The fact that almost all of T&L’s deals are with clients with good borrowing histories with BoS has made its funders comfortable to discuss greater lending volumes for next year, with three of them going so far as to set formal targets.

While director Phil Snewin does not want to count any chickens before they are hatched, he says that no deals introduced so far – almost all of which have been over £250,000 in size – have caused any problems for funders.

Snewin, previously head of transport and logistics at BoS’ asset finance business, started the business with renowned commercial vehicle expert Paul Lewis and national accounts manager Darren Hallmark.

Now they are looking to hire more staff, in anticipation of what Snewin says will be a second year of growth.

“The trailer market, in particular, has not been hit as hard as the heavy CV market has” says Snewin, adding that the transport market in general was seeing a lot of pent up demand as a result of fleet replacement decisions postponed in late 2008 and 2009.

“Many of the customers we have spoken to this year have got substantial buying plans for the next 18 months” he concludes.

T&L’s confidence is rooted in the proven quality of its niche customer book. However, more generalist intermediaries are also approaching the year with cautious optimism.

Meanwhile, Leasing Programmes (LP), which has kept its own book since 1991, is open to expanding it through acquisitions this year, says director Andrew Wyeth.

Presently, LP has around £2 million of outstanding loans, and since January has been looking to purchase portfolios up to the £10 million mark – “although we would certainly take a long look at anything beyond that threshold” Wyeth adds.

The drive behind this appetite comes from one of LP’s investors, a private equity entity attached to a large banking group.

In the meantime, Wyeth will concentrate on building the firm through targeting sales aid business outside the motor finance and office equipment sectors.

What will go on the book for now will be generally below £50,000 in size, generally for exposure reasons. LP is very cautious on this front, with even exposure to NHS trusts limited in the run up to likely public sector budget cuts.

Unusually for a sales aid broker, LP insists on meeting the customers of the suppliers it works with on any deal worth more than £10,000 – a measure which keeps Wyeth’s team of six salaried staff extremely busy, but which drastically lessens the risk of fraud or client failure.

This transactional methodology, applied to a flow rate business model, has leant a lot of weight to LP’s funding proposals, Wyeth says, calling the strategy “a step backwards in time” and comparing it to the old NWS/Capital bank model.

Partly as a result of this demanding meeting schedule, LP’s business is generally limited to within 100 miles of its base in Exeter. Nevertheless, it does work with a number of suppliers in East Anglia and Scotland.

Most of LP’s business comes from the ‘coffin’ – the coffin-shaped corridor connecting Manchester and London, and taking in Birmingham and Leicester. Nevertheless, it also works with suppliers as far afield as East Anglia and Scotland.

At the same time, another smaller broker, Premier Leasing, is preparing to enter several new markets and reengage in growth after streamlining itself during 2009.

Premier’s last financial results showed turnover down 30 percent year-on-year to reach around £7 million, but profits up considerably. This was partially a result of several redundancies, reducing staffing to 10 but lowering overheads considerably and keeping the business alive and well.

Now, Jones says that Premier is in a “very strong position” to move forward, with several big developments on the way before the end of its financial year in June.

It has been contacted by several new funders, with ten lines already established, and is about to open a new office in Manchester. In addition to this, it is planning several key hires this quarter, with a view to breaking into valuable new sectors.

One of these will be the professions finance sector, without a doubt the most hotly pursued asset finance market in 2010. Another target will be larger public sector deals – an arena in which Premier has had some experience through placing smaller business for around 30 local authorities nationwide.

Aiding Premier in its expansion will be its new proposal management system, into which around £100,000 has been invested over the last two years, and customer relationship management expert Dave Webber, who continues to develop the company’s CRM platform.

Asset expertise has also kept many brokers healthy – take for example UCF Finance and Ilsley Finance, both of which have maintained buoyant in the highly troubled print market, or agricultural introducer group AGF, which has kept a very high quality contact book in the farming community.

Other brokers are pushing ahead with new specialisms. John Barter at Oak Lease seems to be continuing his Google-powered assault on the world of European asset finance, while the long-standing directors of Lease UK are exploring new types of sales-aid programme.

Meanwhile, Quartz Finance and Norton Folgate remain at large in the highly international world of yacht and jet leasing, and the commercial and asset finance arm of advisory firm Vantis is expanding its role as an intermediary to offer services in the field of portfolio review and client restructuring aid.

Others still that have already proven their sales strength on the open market are now continuing their work under new ownership – LeaseDirect Finance has provided the vehicle through which Investec Asset Finance will build its presence in the professions finance space, while Wyse Finance has been adopted as the front-end engine of German-owned IT lessor CHG Meridian.

Back in final quarter of 2008, many brokers were wondering if the culture of introduced business in asset finance was coming to an end.

Now, after 18 savagely difficult months, the inverse has been proved – activity in the broker market has exploded in the first quarter of 2010, and growth is no longer a dirty word.

On the day this article was written, two brokerages reported that the ink was drying on the biggest contracts they had ever signed, while a surprising number of introducers spoken to were looking to take on staff.

Elsewhere in the industry,  lenders are now openly inviting more introduced business. Along with ING Lease’s undiminished support for the broker world, a number of other portfolios are growing more receptive, with Armada Finance, Black Arrow Finance and Aldermore all seeking greater panels this year.

Article contributed by Fred Crawley – Senior Reporter, Leasing Life & Motor Finance

Image copyright: Flickr

As the leasing industry has cottoned on to the need to spot clients in distress as early as possible, companies specialising in business recovery and restructuring have begun offering their services as an “early warning” service for lessors.

Turnaround lender Gordon Brothers (GB) is known to be in talks with a lender about such a programme, while advisory firm and intermediary Vantis has seen a big increase in the number of funders looking to have portfolios reviewed for possible trouble ahead.

One of the major problems faced by asset financiers in the wake of recession has been the perception of lenders as being out of touch with their customers’ financial problems up until the point of missed payments, or worse, bankruptcy.

Mark O’Neil, joint managing director of Vantis’ Commercial and Asset Finance division (VCAF), thinks this is a result of a historical tendency for many lenders, when thinking of clients in distress, to only consider asset value realisation in the event of a liquidation.

He thinks that as client insolvencies have increased, lessors have begun to think “less transactionally”, looking at all the issues surrounding a business holding financed assets, and the revenue generated by those assets as part of a going concern, rather than as a disposals prospect.

In essence, this means that leasing companies have become more concerned with ensuring the survival of clients – a trend that has aligned their interests with those of turnaround lenders such as Gordon Brothers.

Alex Brick, GB’s European CEO, explains how it works in the case of a leasing client that has been identified as distressed: “Our aim is to support a restructuring with additional liquidity, and then provide management support (or in some circumstances replace management) to help the restructuring of the business.”

Presuming the client is then returned to profitability, GB can convert remaining debt into equity and go on to enjoy the gains on the share value of the newly successful business. Meanwhile, the leasing company is ensured continuing payments as a result of GB’s short term fund offering, and avoids a potentially messy insolvency.

However, while Brick feels that a successful restructuring can take place “very late in the day”, it is crucial to act as early as possible. “If your customer is already missing payments, it’s probably too late – you need to restructure long before the client is in danger of insolvency.”

GB’s knowledge of this timescale is what has caused it to be recently approached to provide an early warning system for a large lender, something that many international firms have gone to great expense to build for themselves.

Barclays Asset & Sales Finance, for example, was quick in diverting senior sales resources to form such a programme in 2008, while UniCredit Leasing, under risk director Jens Hagen, reorganised vast swathes of staff to spot turbulence in client balance sheets in time to avert disaster.

VCAF, which acts as an intermediary for leasing companies, has taken things one step further by offering funders pre-lend reviews of companies whose funding requests it has interviewed.

Mark O’Neil of VCAF says that such a service highlights important issues in a client’s business from the very start of a contract, and gives lenders an idea of what product will best suit a company’s balance sheet – such as altered payment structures for businesses with seasonal income.

In addition, when VCAF introduces a deal on behalf of a client, it will stay in touch with the lessee at least on a quarterly basis in order to assess its ability to pay lease instalments and offer further assistance as required. “The client can often be afraid to talk to the lender about financial difficulty,” says O’Neil, “and so we will talk on their behalf”.

The kind of skills that Vantis and GB are demonstrating by looking at lessors’ balance sheets for stress points will not be wasted when the current climate of high insolvency risk fades away, however.

VCAF, for example, has recently been asked by a large bank to look over a portfolio -  not one of its own, but that it seeks to buy. With the risk lessons of the recession well learnt, the M&A climate, when it returns to health, will be one much more concerned with the future health of businesses in targeted portfolios.

How soon will that be? “There are more companies in the leasing market than you might think, waiting with their cheque books in hand” says O’Neil. Watch this space.

Article contributed by Fred Crawley – Senior Reporter, Leasing Life & Motor Finance

Easymeeting, a joint venture between Norwegian video conferencing provider Avikom and British reseller and installer Quest Mark, was founded in 2009 with the intention of introducing video conferencing in the SME sector.

Video conferencing in the UK has seen a much greater uptake by large corporate and public sector customers than by SMEs. However, Kevin O’Shea, Easymeeting’s head of EMEA business development, believes there is great potential for smaller businesses to take up the technology.

One strategy for encouraging them to do so will be to lower the barrier on capital investment, by offering systems on a leasing option with packages comprising hardware, broadband connectivity and installation and support services.

Whereas Questmark has had little experience of selling video conference systems through a leasing model, Avikom has used the strategy in Scandinavia to maintain regular sales growth over the last few years.

So far, Easymeeting has undertaken several initial leasing sales through Syscap, the technology led introducer and funding provider based in Wimbledon. The relationship came about due to Syscap’s existing financing relationship with Imago Group Plc, one of Easymeeting’s equipment suppliers.

However, O’Shea says that the company is looking to broaden its range of leasing partners as business picks up.

Back in the Nordics, Easymeeting has partnered with two leading office equipment manufacturers. Both companies are well known for selling primarily through leasing, and have their own well developed captive finance companies, although have not yet been named.

The SME customer base of these companies overlaps with that targeted by Easymeeting, providing an opportunity for cross selling to a market already receptive to the idea of purchase through leasing.

O’Shea commented: “We want to make video communications an integral part of everyday business, and to do that we’ve got to make it easy for people to have access to this form of communication.

“The equipment is available to SMEs as a leasing package rather than through outright purchase. It makes it easier for them, because most SMEs will buy some form of communications on a lease with a fixed monthly cost rather than a large sum of money.”

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

 Image copyright: Flickr

The question hit on a salient issue. It has since emerged that a number of leasing companies are adding factoring and invoice discounting (ID) to their portfolios. Those involved in this process, which will potentially add millions of euros to balance sheets, include GE Capital, Close Asset Finance, Crédit Agricole and Lloyds TSB Commercial Finance, as well as several smaller players.

GE Capital’s integration, just completed after a year-long process, brings fleet, contract hire, business lending, factoring and equipment finance under one roof. Earlier this year, CA Leasing and Eurofactor launched a similar joint project with the aim of increasing potential revenues and combining their support functions.

Moving the two units closer together makes a lot of sense – both CA Leasing and Eurofactor are profitable businesses that continue to grow despite the current downturn, and there is no doubt the two businesses have back-office functions in common which they could easily share.

Also, Close has just launched Close Commercial Finance (CCF) which brings together its leasing arm, Close Asset Finance, and the bank’s factoring business. Meanwhile, Lloyds TSB Commercial Finance (LTSBCF), which absorbed Lloyds TSB’s asset finance business six years ago and now supplies 22 percent of the UK’s invoice discounting, is now absorbing the old Bank of Scotland Cashflow Finance business.

Last month, the results of a UK business intelligence survey conducted by Ipsos MORI found the proportion of SMEs claiming to use asset finance had crept up from 16 percent to only 17 percent between winter 2008 and summer 2009. The proportion of businesses using invoice discounting, however, shot from 12 percent to more than 16 percent, a 33 percent increase.

No surprise, then, that 55 percent of respondents to Vervaet’s question answered “Yes, we need to broaden our scope to satisfy customers going forward”, and 24 percent said they had already widened their product portfolio to include asset-based products in response to the recession.

At Close, the integration has involved training for staff on both sides of the integration, aimed at promoting recognition of leasing customers’ needs for invoice discounting, and vice versa. Mike Barley, who runs Close’s leasing and factoring arms, said he has seen particularly impressive returns from its ID customers, and plans to offer ‘packaged’ deals incorporating both leasing and factoring.

“Sales teams are specialised in particular facilities, and cross-refer opportunities to each other. Furthermore, they work with bank relationship managers at a local level”

A major advantage to packaged deals is the demand for multi-product support from distressed companies – a client sector that is set to keep on growing in 2010. For ‘phoenix’ firms, for example, a solid ID facility is often what seals the deal in terms of a risk decision on plant finance. No surprise, then, that CCF is seeking business introductions from insolvency practitioners and restructuring advisors, forming a partnership with the Institute of Chartered Accountants with this aim specifically in mind.

Centric Commercial Finance is a newer lender with invoice discounting at its core. It has excelled in a combined offering, growing steadily through lending primarily to ‘disillusioned’ clients since its timely inception on the eve of 2007. Sales director Andrew Rutherford explained that, unlike at CCF, asset finance is a relatively small part of Centric’s lending and often used as a ‘bolt-on’ facility to invoice discounting. It is most commonly used, he said, to refinance clients’ existing assets in order to release liquidity.

Centric’s lending is about using complementary products to keep struggling businesses alive where traditional bank facilities have failed, and this works because of its very close relationship with clients. Communication with customers occurs at director level, with in-depth discussion of business needs on a monthly or even weekly basis. Furthermore, said Rutherford, should a client fail, Centric is usually in a good position to take some control over the business and recover its position. With this extremely hands-on approach, Centric rides the line between an asset finance provider and an invoice discounter.

This intimacy, however, cannot be scaled up to the size of a volume lender. For the largest bank subsidiaries, even the teething problems faced by CCF are dwarfed by the question of how to acclimatise a mass frontline sales force with an entirely new product set.

For this reason among others, large-scale combined lenders are rare. RBS’s Invoice Discounting business runs completely independently of asset finance giant Lombard, while Bibby Financial Services, held in high esteem as a factoring provider, supplies leasing through a separate business. ING Lease, which absorbed ID into many of its country operations back in 2006, last year planned to carry out such an integration in the UK as well. A  spokesperson last month said this was no longer on the agenda.

Most interesting on this level, perhaps, is LTSBCF, which is now absorbing the old Bank of Scotland business. Ian Byers of LTSBCF explained: “Sales teams are specialised in particular facilities, and cross-refer opportunities to each other. Furthermore, they work with bank relationship managers at a local level. “Supplementing this are further specialist teams – ‘fast track’ telesales teams for simpler asset finance deals, dedicated debtor insurance teams, dedicated supplier finance teams, and specialist big ticket asset teams.”

LTSBCF has deployed its specialisms well, but Byers admitted the leasing and asset finance products on offer are fairly “vanilla”. But then again, LTSBCF is much more of a player in the ID sphere than it is in the world of leasing.

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

Article image copyright: Flickr