Even in today’s digitally-driven, post-industrial knowledge-based economy, most businesses need more than just a good idea to prosper. They need premises and processes, communication and distribution networks.
Investing in these assets and keeping them bang up-to-date can be essential to business performance. However, it can also disrupt cash flow – a prime concern for all businesses but particularly those in the early stages of development. This is where asset finance could help.
Asset finance is a term for financial products aimed at allowing businesses to undertake strategic investment in equipment using the most suitable terms. It can take any number of forms – from hire purchase, leasing, rental and operating lease to, perhaps the most popular option, contract hire which involves value-added packages on top of basic finance.
One company aware of the benefits of this funding approach is Homag UK which has teamed up with Bank of Scotland Corporate to launch an asset finance initiative.
Homag Finance provides a “comprehensive finance package” specially tailored to the needs of existing and future operators of machines and technology from the Homag Group.
Finance options
Through Homag UK’s association with Bank of Scotland Corporate, Homag Finance can offer a flexible range of finance options to allow businesses to undertake strategic investment in equipment. The association also means that we won’t set hard and fast rules about minimum levels of advance, recognising that customers have smaller equipment requirements, as well as larger ones.
Asset finance has become increasingly recognised as a major funding stream in recent years. There are a number of potential benefits including: release of working capital, payments being matched to use of the asset and the linking of security to the asset being funded. Contract hire can also reduce cash flow impact considerably and remove the potential headache of disposing of the asset at lease expiry. It has been trialled by several Homag Finance customers and they are already reaping the benefits.
Bespoke office manufacturer Le Al, whose customers include financial institutions, solicitors and other blue chip companies, recently invested in a beam saw to improve throughput, enhance accuracy and quality and to also cut wastage. The company was offered a contract hire package, a facility which enabled Le Al to install the saw on an “off balance sheet basis”.
Director Lesley Jamison said: “The whole contract hire package brought lots of advantages. Apart from the financial benefits, the saw is fully maintained through a comprehensive mechanical and breakdown cover that allows us to be covered in the event of damage or total loss of equipment. It’s a way to invest in new equipment that comes without the responsibility.”
Appropriate financing
Asset finance has a pivotal role to play in ensuring that a business uses the most appropriate financing instrument for the given situation, as office furniture manufacturer Selector demonstrates. The company, which started in 1990, recently moved to larger premises and Selector’s Ian Stansfield said that it needed to invest in new machinery in order to increase production and, most importantly, business growth.
“There was no way we could afford to buy a new beam saw and edgebander through conventional payment methods,” he said. “Contract hire was therefore the obvious solution. Using this facility we have been able to install a Holzma through a complete finance package which, most importantly, works for us. Fundamentally it means just one single payment after the machines have been installed and our machines are also covered for maintenance, breakdown and accident for five years.”
Asset finance is traditionally seen as a transactional trade, a series of one-off, done as need deals. But Bank of Scotland recognises that successful businesses have a continuing need for investment. Through its association with the bank and its own dedicated team of eight specialist advisers covering the UK and Ireland, Homag Finance will be offering asset finance in an ongoing relationship-led approach.
