In the UK’s post-recessionary environment there are a number of small asset lenders who are conscientiously working away at building their books, and broadening their experience in new asset sectors.
They are likely to represent the future entrepreneurial spirit of the leasing industry as Tier 1 asset lending retreats into the prescriptive underwriting regions of the clearing banks.
Such companies are currently operating very much in their own niches, with growing support from their intermediary originating sources but relying on their own expertise and skills at setting their credit standards.
Such a lender is Asset Advantage, the Basingstoke-based lessor which has just reported a 48% increase in new business volume in its year ended September 2014.
The company was originally formed in 1995 as an operating lessor in the public sector but since 2007 has specialized in providing asset finance and loans of between £15,000 and £350,000 especially for the small to medium-sized business sector.
Philip Knight, Asset Advantage’s credit & risk director told Asset Finance International that new business is originated by a panel of around 50 brokers and intermediaries which enables the company to provide UK coverage “from Land’s End to Aberdeen”.
“Specifically,” he said, “we underwrite those deals that are outside the province of Bank-owned Tier 1 lenders.
A well-spread book
“This is not say that the deals are in any way sub-prime to those that Tier 1 lenders will accept. Our default levels are very low and amongst the £100 million we have financed since 2007 we have written off less than 1.5%. Rather we write the deals that other lenders won’t do because their business models require a more mechanistic approach to underwriting – and we avoid a prescriptive view of doing transactions.”
Whilst adopting a “traditional lending approach regarding the customer” Asset Advantage does not set residual values preferring to provide full pay-out leases, hire purchase and commercial loans (non-mortgage).
Knight stressed that the company is prepared to lend across all sectors ranging from office furniture, technology, vehicles to yellow goods. “We have,” he added, “a well-spread book.”
Supporting brokers are carefully selected and invariably ones with whom Knight and his colleague Jonathan Eddy, managing director, have been familiar, and doing business, for some time.
Proposals are handled carefully with Asset Advantage credit managers on the road meeting customers at their premises - and invariably accompanied by intermediaries. “Our aim is not only to secure this specific deal but rather to build long-term relationships with our customers,” he stressed.
After graduating from University College of North Wales with a 2:1 BSc. (Hons) Knight began his career at Lloyds Corporate Banking, before moving to the group credit department at Lloyds Bank Head Office Risk Management.
Following roles in credit and risk at Lloyds Bowmaker, De Lage Landen and BNP Paribas he took his present role at Asset Advantage in 2007.
Critical of trade bodies
Knight and his colleagues at Asset Advantage are critical of what they describe as the failure of the UK industry’s trade associations to heighten the profile of asset finance and leasing companies.
“The industry is very poor at marketing itself,” Knight stressed. “Since we operate without a direct sales force we can’t promote ourselves in the marketplace in the way we would wish to – neither can our supporting brokers who simply don’t have the resources.”
“Our main challenge as an industry is that of growing the market. I am convinced that there are a whole host of SME’s who would benefit from our approach to lending. I would like to see our trade association doing a lot more to promote the independent asset finance industry directly to end users. I find it extremely frustrating that there’s a lot in the press about the need for new lenders to come into the banking market to support small businesses, yet we and many other non-bank lessors have been doing this for years!”
In 2012 Asset Advantage wrote some £18 million in new business. The following year it totalled £23.4 million and 2014 is on target to achieve £40 million.
Looking forward, Knight forecasts that Asset Advantage will grow its book to £100m in the next two years as it steadily recruits more brokers onto its panel of intermediaries.
“Our culture is one of applying commercial common sense to credit and underwriting and offering a consistent product delivery to our brokers. Although we don’t set volume targets for our brokers we do expect a cultural fit. If we ‘get’ what we want from deals then our credit appetite can form an important part of their sales toolkit.”
Knight is highly optimism for the future – without expecting much support from trade associations. Meanwhile Asset Advantage will be testing and exploring new asset sectors.
He added: “Having a competitive advantage in an industry with so many other skilled lender competitors is always going to be challenging. Our advantage is that we have the skills, resources and commercial common sense to rise to that challenge.”
