Asset finance is an option that suppliers of capital expenditure items can no longer ignore with more of their customers finding it difficult or costly to secure finance through their banks.
A survey produced by Funding Options, found that around 17% of SMEs have reported that their overdrafts were completely removed in the last two years, with a further 30% also having reductions imposed. This directly impacts on potential sales for suppliers as more customers find themselves with budget constraints, forcing suppliers to discount products to secure sales.
However, asset based finance has become a popular option for businesses. Figures released by The Asset Based Finance Association (ABFA), noted an all-time high of £4.2bn of funding in 2015 – a rise of 61% since 2011.
How can Equipment Suppliers avoid discounting and still win sales?
By partnering with a Finance Provider, Equipment Suppliers can offer a finance solution to their customers to overcome price objections and remove the need to discount.
Asset finance is a form of finance used by businesses to obtain equipment necessary to operate efficiently and effectively within their sector. Wholly or largely secured on the assets being financed, the need for additional collateral is reduced and gives customers the flexibility to replace or upgrade equipment at any time.
Asset finance also allows Equipment Suppliers to overcome common sales barriers:
British Business Bank and LDF
A further sign of the growth in asset finance is our recent announcement that LDF has now partnered with the British Business Bank to provide a £51m facility to fund a portfolio of newly to be originated small business asset finance receivables.
The transaction, which is 50% guaranteed by the European Investment Fund, is the second of the British Business Bank’s ENABLE Funding programme, which aims to significantly increase the supply of leasing and asset finance to smaller businesses in the UK.
What Next for Equipment Suppliers?
It is clear that by offering asset finance to their customers, Equipment Suppliers will be providing a solution that their customers are not only familiar with, but are also starting to demand.
At LDF, our goal is to help our partners win more business, maintain and develop customer relationships and increase overall revenues through the adoption of a finance offering and that is why we have developed the LDF Partner Programme.
References i Nesta’s 2014 report ‘Understanding Alternative Finance | ii SME Finance Monitor iii Nesta’s 2014 report ‘Understanding Alternative Finance | iv Federation of Small Business report | v FLA Asset Finance Research