From time to time as an Asset Finance Broker, I am approached to assist with financing specialised equipment that challenges the norm and is a bit outside the box.
Often when it comes to finance, if you are trying to do something different, Lenders will sometimes run for cover and hide under the “our policy” doona!
But that is what I love about my role, finding solutions that at the outset appear challenging.
Financing Specialised Equipment – The Challenge!
For example; I was recently approached to assist clients with financing specialised equipment for their business.
The upsides were:
- The business was long established
- They were experienced and well regarded in their industry
However, the downsides were:
- The equipment needed to be modified using a concept that was not proven in Australia
- The client wanted the modifications to be to their specific design making the equipment highly specialised
- There were multiple suppliers involved which added complexity
- Funding was required not only the initial purchase – but also for the expensive modifications
In a nutshell, the financing request was far from straight forward!
Don’t Enter Negotiations Blindfolded!
To find a solution, our starting point was to complete our Loan & Bankability Assessment. This is a powerful process we use to:
- Establish an applicant’s ability to service existing and proposed borrowings
- Identify issues that may need to be addressed to improve the prospects of approval and the clients negotiating power
To approach the market before undertaking this work is a bit like trying to play tennis blindfolded! You might be lucky and hit a few balls, but more likely, it will end badly!
Address Lender Concerns Before Approaching the Market
Whilst the Loan & Bankability Assessment confirmed the clients capacity to service the proposed borrowings, as we worked through the process, we recognised to achieve a successful outcome, we would need to address the potential concern of Lenders around the value of the asset against which they were being asked to lend, given:
- The asset would be modified using an unproven concept in Australia
- It would be highly specialised
The solution to this came in two parts:
- We obtained a valuation of the asset, to provide peace of mind around the underlying asset value after the proposed changes had been made
- Demonstrated the cash flow benefit contribution the asset would make to the business going forward which supported the rationale for making the modifications.
Market Access Delivers More Options & Better Outcomes
The next step in the process was to consider which of our panel Lenders were flexible enough in their thinking to consider this type of financing.
This is important, particularly when seeking financing for specialised equipment.
Lender policies and appetite varies widely.
Too often business owners approach their existing Bank, in the mistaken belief all lenders are the same. That if their Bank won’t do it, no one will.
However, increasingly some Lenders service particular niches in the market. They build their expertise and understanding by focusing on a niche and do it well.
Whilst the majors continue to play a valuable role, the market is far more fragmented than a decade ago. For businesses, this means more options exist.
A Successful Outcome Achieved
The key to the outcome we achieved was working with Lenders who were prepared to consider the financing and who were not handcuffed by “policy”. They had an open mind and were prepared to assess the request on its merits.
Ultimately, we were able to secure financing for both the asset purchase and also the proposed modifications.
Not only this, but the rates and terms were also highly competitive.
Needless to say, the client was delighted.
In Summary, this is a great example of how business owners can use the power of market access and Specialist Lenders to access the finance they need.
If you want to learn more or are seeking financing of Specialised Equipment don’t hesitate to give me a call.
