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| Bridging the equity gap |
Comments from Richard Mascall of SHM Stevens Champion for the Midland Business Insider ‘Raising Finance’ feature July 2006
Asset-based finance is increasingly becoming an attractive option for SMEs to raise finance to move to the next stage in their business. Asset-based finance has been assisted as venture capitalists have raised their minimum investment limits above the amount required which is often to large for private angels or banks alone.
Richard Mascall, SHM Stevens Champion, comments: "For companies looking at asset-based finance the market is highly fragmented with banks, finance houses and independent funders all providing products which range from operating leases, hire or lease purchase, sale and leaseback to chattel mortgages.
"Asset finance provides a fast generation of funds for business growth and development. With the wide range of the products there are real alternatives to the traditional extension of overdraft facilities, factoring or invoice discounting.
"The evidence is that there is a move away from high street banks to asset-based lending specialists. With the flexibility they can offer it makes it a great deal easier for companies to find the best solution.
"We are seeing a growing trend towards sale and leaseback. This allows capital in the form of a percentage of the asset value to be raised quickly against plant and machinery assets. Once the advance is repaid in full, the assets pass back to the company. "An asset's market value can often be undervalued. Balance sheets do not always reflect plant and machinery's true worth, so it is essential to use specialist valuers who know the market. They are experienced working with asset-based finance, secured lending and structured finance so will give achievable values which, in turn, will help you to provide best advice and secure your position going forward throughout the term. More recently, we are seeing businesses using stock as a vehicle for raising finance.
"It is important to consider the type of equipment you are going to use against asset-based finance. Lenders are always cautious about specialist machinery and prefer generic equipment as it always has a ready market. Jigs and fixtures are a prime example of equipment which will prove difficult to provide a realistic valuation for asset-based finance."
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