ARE THE BANKS LENDING?
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Many banks will prioritise their own customers for asset finance. Some have pulled out of asset finance completely, but will offer unsecured loans; Barclays Corporate, for instance, has withdrawn its asset finance solutions to customers with turnover under £5m but is offering loans and overdrafts, etc, which can be used instead. The bank claims this can be cheaper, although common sense suggests not, unless you specifically want a vanilla loan; only a quote will tell you either way. NatWest doesn’t offer asset finance, however its specialist sister company Lombard does.
Others who were specialists in the field have aggregated their vehicle products into a wider offering. For instance, Alliance and Leicester Commercial Vehicles was amalgamated into Santander’s general asset finance division.
Last year the banks lent £66bn to SMEs – this year it will be £76bn thanks to the Project Merlin agreement, but much of this will not go to asset finance.
The Forum of Private Business has calculated from regular member surveys that lending has become steadily more expensive – a view supported by the Confederation of British Industry – and despite government pressure, hard to secure. PFB spokesman Phil McCabe says: “In February, 25% of members surveyed said cost of finance is an issue and 34% cited access to finance. The last Economy Watch survey (November 2010) shows that, while 70% deemed finance affordable, this was down from 85% in April. Also, bank charges increased between April and July, with 55% of businesses seeing an increase in the 12 months to July and the cost of lending crept up between February and November. At 5.8% (overdrafts) and 4.6% (secured loans) and 12.3% (unsecured loans) interest rates are significantly above the 0.5% Bank of England base rate.” Getting the right deal for you is not just about cost – it’s about the right access to and use of funds for your company. Start planning your fleet acquisitions for the next three years carefully now. Euro-6 kicks in with 10% higher capital costs and rumoured higher fuel usage in December 2013. Manufacturers will probably switch to manufacturing Euro-6s from the second quarter of 2012. Interest rates are also likely to rise, perhaps to 1.25% by January 2012, although this won’t necessarily affect the cost of lending overall because it depends upon the risk presented by your business. Although the money markets are more liquid at the moment, it could be argued that operators who have postponed fleet replacement have also been insulated to some extent from the lack of finance – as large numbers of operators seek to renew fleets, that liquidity could be put to the test.