An existing customer for whom we have financed several deals has recently won major contracts to manufacture a unique product which will potentially change a whole industry.
The process requires the customer to relocate their business and a major investment in the near future. Asset finance is sure to play a part in the expansion but the business needed cash right now.
We were asked if we could refinance a 3 year old solar panel installation, which had a FIT contract for the next 15 years. Our regular lenders all said no immediately due to the asset and the proposal not fitting the “norm”. After speaking to several lenders we identified the ideal partner and completed a sale and lease back within 48 hours.
We look forward to assisting the business achieve its future expansion later this year.
In December we received an introduction to an agricultural business that has diversified into recycling green waste. Within the green waste is a considerable amount of waste wood which once dry can be chipped and sold on as a “green” renewable fuel.
Our customer had already obtained planning permission to install two biomass systems to generate heat to dry the recycled wood and receive RHI payments for the next 20 years. A lucrative investment.
The whole scheme needs to be up and running by March 31 2017 and it was crucial that a stage payment was made to the supplier before Christmas.
We made it with the first payment being made on 23 Dec 2016 so ensuring the completion date remains on schedule. We have just paid out the second stage payment and completion is due for the end of March.
Prolease were able to be responsive and innovative by financing construction work, buildings, power supply and a biomass system. Our stage payment facility has enabled the project to remain on schedule whilst preserving our customer’s cash flow.
We do not often refinance equipment but our lenders are telling us they get asked to do this frequently.
In September we completed 2 refinance deals – the first one was for an existing customer KDW Ltd and was to refinance a 2006 DAF commercial and a 1993 metal press pictured below.
Both of these equipment items were refinanced over 3 years using hire purchase – so ownership and annual investment allowances remain with the customer.
This is a major benefit for the customer.
If you are thinking about raising cash by refinancing equipment then it really is a benefit if you do this within 3 months of purchasing the equipment. This gets you a lower rate, whilst avoiding time consuming and possibly costly valuations.
What do we need to provide sale and hire purchase back finance?
A copy of the original invoice, evidence of payment to the supplier by you – so a bank statement or a receipted invoice, an invoice from you selling the equipment to the finance company and a signed finance agreement.
The above deals were completed using our e docs which meant funds were released almost immediately paperwork was raised.
Contact us if you would like to know how we can help you release cash from equipment you have paid for.
We have been visiting trade shows at the NEC including MACH, Foodex, CV Show and Multi Modal later this month. They have met a number of new and existing suppliers and are both excited about working and building new relationships.
The finance market is buoyant with a wide range of lenders keen to support UK businesses. Prolease has successful longstanding relationships with lenders wanting to do support our customers.
Selling equipment is never easy but finance does often help.
Those industries promoting finance have been successful, just look at the record number of new car registrations. There are lots of other examples where sales teams help to remove obstacles from the purchase process. We can help you to be more competitive and sell more by simply promoting your products with a finance option.
Contact Stuart to find out how Prolease can help your business.
We have been actively involved financing racking and storage equipment for the past 10 years or so. More recently this type of project has lead to us financing other capital expenditure for businesses changing the use of their workplace.
This month has seen us complete a combination of hire purchase facilities to finance racking, a large mezzanine floor at £150k, £120k of bespoke seating, £57k of imported desking, £20k of concrete groundworks and the £100k portable building structure it will support, £40k of LED lighting and several new fork trucks.
These facilities have been on standard HP terms, refinance, sale and hp back, prepayment facilities and stage payment options. So whatever payment terms customers and suppliers require we can probably keep everyone happy.
We have experienced a busy start to 2016 with lots of activity but to be honest we are not sure what we are achieving. For certain we will find out over the next few months. Many of our recent deals have been larger projects and it seems delivery and installation on most of these jobs ends up being put further back – by several months.
We have seen several larger deals which have started with one equipment type eg racking and mezzanine floors and these deals have expanded with the customer’s choosing to include other cap ex such as LED lighting, office furniture, partitioning, IT, light commercials and even cabling.
This goes to show that customers spending money have budgets which need finance to make the whole project work and for delivery in one hit rather than several stages.
It does seem that the major banks are back in town and in some cases even lending again but sporadically. Banks have always been fair weather lenders and have short memories. In our view best used for commercial mortgages, working capital and overdraft facilities and definiteley not to be relied upon for medium term asset finance.
In January I visited a trade show which did not have the expected number of visitors. In fact exhibitors had a lot of spare time and shared many views with me about their own sales performance and how they perceive my company Prolease Ltd, and general comments about finance in the market.
I heard the same comments repeated numerous times and so I have decided to address those comments in this article.
Customers are not buying equipment – well only you know how much this applies to your business. But to some extent this applies to all of us because we all want more sales.
All my customers pay cash – this is what you would expect if you only offer your customers a cash payment option.
Customers have cash but do not have budget approval
These statements really do contradict each other but we hear them repeated all too frequently. Your customers can only pay you cash if you don’t offer an alternative but currently it appears not enough customers are investing.
So do potential customers have the cash and budget?
Why are they not investing?
How can you tell which customers have cash and which will buy? I don’t think you can and I don’t think you should try to find out.
It is worth considering the options that might address the above which can add sales to your business.
- Discounting– in 1991 the machine tool suppliers in the UK were not selling machine tools. When I asked them why, suppliers told me customers could not afford their machine tools. The suppliers’ solution was to discount their products until customers could afford to buy them, but in reality price was not the issue. So yes, this approach can win sales but will damage your profits and long term business plan because the discount will need to be massive. What does this strategy do for your product?
- Supplier credit terms – this is an option if you can afford to give credit to customers allowing them to delay payment. Can be damaging to cash flow and you have exposure to customer credit risk. Are you a bank or do you want to be like one?
- Finance– it is not surprising that I recommend finance as the best if not the only practical solution. Most traditional equipment assets (identifiable, durable and removeable) are sold with finance because it works e.g. cars, lorries, fork trucks and even photo copiers. So why not give customers the option to pay for the equipment you are selling by spreading the cost over periods of up to 5 years?
Finance versus Cash
Selling equipment for cash means you have got lots of competition.
A well-known iconic motor bike manufacturer surveyed their customers to establish who their main competition was – they found the answer surprisingly was not other motor bike brands but home improvements. Customers faced the choice of buying the bike or a conservatory.
The equipment you want to sell is in competition with many other items customers want or need. Your potential customer’s budget is required to cover working capital, vehicles, property, marketing, staff, IT and other equipment purchases. This is fine if your equipment is budget approved but what if something changes or it is not approved? Your current sales are in the bag but what about future sales?
Offering a finance solution can win incremental business – you will not lose your cash sales but you will pick up additional sales from new customers. This is what we all want, extra business and for really very little extra effort.
I am uncomfortable mentioning finance
We often hear this stated by sales people who do not choose to finance purchases in their own personal life and are therefore uncomfortable with offering a finance option to their customers. This is probably the single most common objection I come across and to be honest I am still looking for a good solution.
Is the sales person who is not using finance overlooking their own circumstances? Do they have a house mortgage? Car finance? Credit card? 0% finance purchases? Monthly insurance premiums?
Should the sales person make a decision to exclude a purchasing option unless stated by the customer?
Please let me know any thoughts you have on this topic.
I don’t want to suggest to my customer they cannot afford the boat
Customers will not ask for finance because they may feel uncomfortable too and many will not be aware the equipment you are selling can be financed. The banks are still difficult to deal with and they may not be supportive of a non traditional asset.
Giving customers the option to spread the cost of investment is helping them to buy and justify the purchase. £10k over 5 years costs from £235 per month – some customers considering investment will view this as a sensible option to cash. If cash is not available or in demand for other purchases the finance option can win the deal.
Our standard terms are available via the link below which is also on our web page.
How should I introduce finance? – it can be really simple and should be part of your standard quote.
Adding the following words next to your capital cost quote will get the message across
“Cost price £15000 + vat or £341 pm over 5 years with Prolease Finance subject to credit approval”
We can add more but we do like to keep the sales pitch simple.
We are looking at ways to help you to get the customer to perceive the purchase price in a different way. And a way that will help them justify buying from you, now rather than some time in the future.
In December 2015 we began working with an external consultant, Peta Stuart-Hunt (Twitter: @PRPeta), to assist our marketing strategy and ramping up our social media presence.
We now have a Twitter account @proleasefinance and we have been using #spreadthecost as our hashtag.
Please do get in contact with me if you want to discuss how we can help you to win more business this year.
We have just completed our second office refit for a digital agency who specialise in online marketing and ecommerce web development. They have been a customer of ours since 2011 and in that time have grown significantly.
The office refit consisted of partitions and wall screens to create a smart new office. They also asked us to include a Mitsubishi heat pump system on the same agreement which we were able to accommodate.
If you have similar requirements with one or more suppliers for your upcoming project then as long as all suppliers require payment at the same time, we can arrange this for you.
After completing a racking deal for our Scottish customer, they were so pleased with our rates and service that they asked us if we could help him secure finance for some new Apple IT equipment as well.
To enable us to overcome invoicing issues, Apple wanted payment before delivery and could not provide serial numbers we found a Hereford based supplier who was willing to help.
We now have another agreement coming up with the same customer and are looking at new opportunities with the new supplier. If you are experiencing the same problems sourcing Apple equipment we may be able to help.