Short-term asset finance solutions help businesses invest
Confidence is growing amongst British businesses following the certainty brought about by the General Election in May which returned a Tory government with an outright majority – against many people’s expectations.
A business confidence index compiled by the Institute of Chartered Accountants in England and Wales (ICAEW) revealed that for the three months to the end of September, confidence has climbed to a score of 22.4 – the first rise in over a year. Back in June, the same index had a reading of just 16.2.
At the same time, the ICAEW said businesses’ sales revenue had grown 5.1% during the past 12 months, while profits have climbed by 5%. Meanwhile, exports, which had been held back by weak economic growth in Europe, had edged up 3%.
As a result, businesses now foresee faster growth in sales revenues and volumes, profits, and exports over the next year. The most buoyant expectations over the coming year were in the construction, IT and finance sectors.
Investments levels still low
However, despite the buoyant mood, many businesses are saying that they are reluctant to invest long-term in plant and machinery over the months ahead.
But, for the last year, the ICAEW noted that businesses had invested more than they said they planned to, by resorting to short-term finance to fund key purchases.
It appears that while uncertainty over Greece and a possible Greek exit from the Euro-zone meant companies were reluctant to invest for the long term, they were more comfortable in making short-term decisions to invest in assets such as plant and machinery, new IT systems and other key asset classes.
Incentives to invest
As well as the certainty of the General Election result, the ensuing Summer Budget also brought clarity over the investment levels that businesses can claim tax relief for.
In his Statement, Chancellor, George Osborne, announced that the Annual Investment Allowance (AIA) will be set permanently at £200,000 from January next year, providing further certainty for businesses going forward.
The AIA provides a 100% deduction against tax of the cost of most plant and machinery, but not cars, and is available to most businesses. The new limit now gives renewed confidence over the levels of asset investment going forward – although the investment still has to be financed, of course.
One way of spreading the cost of asset investment is through a finance solution which allows the initial capital outlay to be kept to a minimum – helping cash-flows and aiding budgeting.
And to find such funding, many businesses are turning to independent asset finance providers, rather than the banks, for a number of reasons, including greater transparency, more attractive rates and reduced administration.
Why the independent providers?
Independent finance providers can offer a credible alternative to bank lending for many business finance needs, and often have extensive experience in the asset finance arena.
They are expert at providing the appropriate funding for a whole series of asset classes, including plant and machinery, IT equipment, printing machinery, agricultural machinery, marine and aviation equipment – and many more.
Asset financing typically covers a variety of lending and payments solutions commonly tied to the assets involved, so it’s important to discuss the solution that best suits the needs of the business before making the final decision.
What is the best solution?
Asset finance will usually involve leasing or lease-like structures, such as hire purchase, operating or finance leases, or sale-and-lease back arrangements.
The asset finance provider should be able to draw on their experience and expertise to offer the most suitable finance arrangement to meet needs of the business.
They should also ideally provide a consultative approach which quickly identifies the key business objectives. What does your business need? Where is your cash-flow tied up? What are your business aims?
Once these have been clearly identified, your finance provider should work with you to offer the type of asset finance that will help your business do what it needs to do.
Is panel funding the best option?
One option, and one we at Maxxia recommend, is to use a panel of funders to find the best finance deals.
Panel funding is advantageous because the introduction of what is effectively competitive tendering for every asset funding requirement means that the client always gets the best and most competitive deal available.
And the advantage of working with a provider like Maxxia as the funding manager is that all transactions can be recorded, reported and subjected to audit in a totally transparent fashion, regardless of where the ultimate funding comes from.
The client also gets the administrative benefits of dealing with just one key partner whilst enjoying the financial benefits of working with many.
If you would like more details on why now may be the perfect time to invest in the future of your business, please get in touch.