During Q4 2014 it completed implementation of its stock finance facilities within the UK network of two principal agricultural equipment manufacturers, Kongskilde and Lely. Already this year the company is negotiating with other manufacturers and dealers to create and implement a range of stock finance programmes to enable them to stock their full range of products.

A crucial element

Andy Taylor, Head of Sales at Hitachi Capital Business Finance told Asset Finance International that stocking finance is a crucial element in a successful manufacturer-dealer model. “Manufacturers,” he said, “can benefit from enhanced product distribution, increased sales opportunities and reduced credit risk, while dealers can obtain improved finance terms and credit availability.”

In creating its stock financing solution Hitachi Capital selected Sword Apak’s wholesale floorstock system WFS v6 which, Taylor explained, addresses the full range of system requirements which include a new Automated Direct Debit Instruction Service for BACS, a new system branding, as well as general ledger links and HPI feeds.

“It is an excellent system,” he stressed, “which, following a significant investment, was fully implemented in Q4 2014.”

Hitachi Capital’s stock financing product is stand-alone in that it does not rely upon retail finance for its cost to customers. “It is an independent profit centre for Hitachi Capital,” he said, “and we fully expect that retail return will naturally follow on from its implementation.”

Taylor, who was appointed to his present position some 24-months ago, as well as leading the Commercial Broker team, heads a seven-strong Farm Broker and Vendor team which originate new business from around 60 specialist introducers based throughout the UK.

He brought a wealth of experience in the broker market having started his career in the asset finance industry at NWS Bank before joining GE Capital and then ING Lease UK in 2000.

Emergency fund

Taylor’s appointment came shortly before the company established an emergency fund (at 0% interest) to support flood-stricken farmers in meeting unforeseen costs following the 2013/14 winter deluges throughout the UK.

In addition further short-term solutions were made available to help farmers with existing financial commitments, to manage cash flow, and to retain a clean credit history.

Taylor confirmed that Hitachi Capital has a long standing involvement in the agricultural industry and the company is very aware that cash flow is king for many farmers. Consequently it allocated £4 million of short-term funding at zero percent interest to assist farmers who need to replace or invest in equipment that may be required as a result of the flooding.

At the time Michael Alsop, managing director of Vaderstad - one of Hitachi Capital’s key vendors – stressed that demand for support of this kind is extremely welcomed by the industry in overcoming cash flow concerns.

“With 80% of all farm machinery bought on some form of finance,” he said, “the burden of extra costs in dealing with the crisis situation, and latterly tackling the necessary remedial work to fields once the flood water subsides, will inevitably create financial strain.”

A myriad of industry challenges

Meanwhile, the UK agricultural sector continues to struggle in the face of a myriad of challenges including underinvestment, aging practitioners, and falling productivity – none of which have been helped by serious reverses caused by the weather. The high value of the euro is also slowing the export market for used agricultural machinery.

Taylor believes, however, that there is some cause for optimism. “The outlook is improving,” he said, “and we are seeing an increasing appetite for customers to invest in assets.”

Meanwhile Hitachi Capital itself has weathered the downturn rather well. Taylor stressed: “The brand is known for quality, and we have an extremely well-performing book.”

As well as stock financing the company’s range of financial products include operational leasing as well as the ever-popular hire purchase – “UK farmers still prefer to retain title to their assets”. The more sophisticated seasonal- and annual-structured payment plans are also available and can be readily implemented since, as Taylor stressed: “The company has a very flat management system which enables innovative finance structures to be created quickly.”

Hitachi Capital was pro-active in the run up to the recent Financial Conduct Authority’s (FCA) regulatory changes. “We supported our brokers throughout the FCA process,” he said, “and commissioned Compliancy Services to put in place a series of training programmes for the brokers at our Staines office. In fact we funded our brokers’ membership of Compliancy Services for a six-month period so that full FCA compliance could be effected.”

Andy Taylor is optimistic for the future saying: “Looking ahead a couple of years we would hope to have a further six to eight new vendor partnerships in place and functioning well.”

He added: “With our dedicated UK focus we can help manufacturers develop specialised financial solutions tailored to their dealer needs. By providing the industry with a good alternative to other established finance providers or where a manufacturer currently funds dealer stocking via standard open-account terms, programmes such as ours can help dealers better manage their cash flow by matching the sale of product to pre-agreed repayment terms.”