Most businesses when thinking of external finance, regardless the requirement, will think their bank first. Whilst this is a sensible place to start, there are often more appropriate solutions. Much like purchasing the right tool for the job, it is really important that the correct facility is used for the correct purpose, to ensure growth isn’t prohibited further down the line.
Particularly where asset finance is concerned there are lots of moving parts which your bank won’t always be able to accommodate.
Supplier’s payment requirements
Your bank
Your choice of supplier will have their own standard payment requirements, which often stipulates an amount on order, a payment on delivery and the balance on completion. High street banks struggle to offer this as a solution on asset finance, meaning you may have to pay some of the stages or the full amount and get reimbursed, which doesn’t help to ease cashflow pressures.
Independent finance broker
Brokers have access to a wide variety of different funders who all have different strengths. Our funders understand that stage payments are part of the new post COVID world and have products to accommodate this, paying the supplier in the stages they need to progress the order.
Timescales
Your bank
In our experience, the process can be slow and tedious with the bank, with a large amount of information being requested on top of decisions taking weeks not days.
Independent finance broker
At Focus we will only ask for information that is absolutely necessary, as we appreciate collating information takes time. Our decisions can take as little as an hour but maximum 48 hours.
Equipment specification
Your bank
Asset finance with the bank is for more tangible assets, such as plant, machinery and vehicles, and the more intangible costs often associated with most purchases can cause issues. In these scenarios you may be offered a term loan, but these often require debentures or other security over the business and then won’t be available for where a loan really is the most suitable product.
Independent finance broker
Specialist asset finance companies understand that there is an element of intangible costs (such as installation) in most projects and that in some cases such as fit-out or software, there is little to no security in the asset. This has no impact on their ability to fund these projects on asset finance leaving term loan open as an option to you if really required for another purpose.
Holistic overview of annual plans
Your bank
By approaching your bank, you may be exhausting a facility without truly understanding the implication this may have on your future purchasing plans.
Independent finance broker
A good broker will have conversation with you regarding all your purchasing plans to establish the most appropriate solution for your immediate requirement whilst also making sure that the relevant facilities are also left open for future purchases.
There is also a misconception that the bank will be more competitive, but this is far from the truth. In our experience if the bank wants the business they will always be able to be the most competitive, but if the deal seems too difficult, they will price accordingly often pricing themselves out. It’s also worth bearing in mind that the cost for the wrong use of a facility is generally far greater than the initial savings. For example, if you use the bank for an asset finance facility and later require a loan for working capital purposes, the bank may be at exposure resulting in your only option to be a high rate loan with personal guarantees.
Another benefit of keeping your banking and other finance requirements separate, is you don’t have all your eggs in one basket. This means if you decide you want to change your banking, this is less of an upheaval.
So there is definitely room for another finance professional to help you navigate the minefield of business finance, as gone are the days where bank managers were at your beck and call. An independent finance broker will be able to guide you through the process maximising finance for your business improving growth and innovation. At Focus, we would be delighted to answer any of your finance questions and help point you in the right direction!