Making your assets work for you

Edited by the Manufacturingtalk editorial team Feb 19, 2004

There is no reason why lack of cash should present an insurmountable obstacle to sustained investment by the majority of businesses operating within manufacturing says an underwriter.

There is no reason why lack of cash should present an insurmountable obstacle to sustained investment by the majority of businesses operating within manufacturing and, more specifically, within the engineering sector.

This is the strongly held view of Les Porter, Director of the engineering finance division of Close Asset Finance, which will be fielding its full underwriting team at MACH 2004.

This means that anyone attending the exhibition will be able to place an order and secure the necessary funding at the same time.

In fact, at the previous MACH exhibition Close Asset Finance advanced GBP 1.5 million as a direct result of this hands-on approach, while receiving enquiries totalling GBP 10.5 million from visitors to the National Exhibition Centre.

"Manufacturing has had a very difficult time of it in recent years," he says, "but it can still lay claim to substantial assets in the form of existing equipment and premises." And it is these assets that can fund new initiatives to help individual companies, irrespective of size, to become more efficient and productive, and by definition more globally competitive and profitable.

The first finance company to be elected as a member of the Manufacturing Technologies Association (MTA) and the European Association of Machine Tool Merchants (EAMTM), Close Asset Finance attributes its success - monthly turnover is in excess of GBP 4 million and growing - to its understanding of the machine tool industry, the industry's customers and the needs of manufacturing as a whole.

A wholly owned subsidiary of Close Brothers, the UK's largest independent investment bank, Close Asset Finance focuses on the significance of a proposed investment and its potential impact on a business as a whole.

The engineering finance division's senior management team's unrivalled knowledge of manufacturing coupled with extensive underwriting experience underpins a flexibility of approach that, since 1998, has enabled many UK companies to benefit from "making their assets sweat for them".

By this Porter means that it is usually far more effective to fund, say, the purchase of a new machine with asset finance than to tie up a bank overdraft facility that is of much greater benefit as a source of working capital.

But what the customer really needs, he adds, "is someone who appreciates that investment is not just about installing a machine.

It's about such things as operator training that need to be done before that machine begins to generate revenue.

And it's about suggesting innovative ways to fund the total investment and enabling the customer to obtain the maximum return for the minimum of risk." He points out that someone running a small engineering business may find it difficult to put his case across to people who don't understand engineering and this is where specialist knowledge comes into play.

The engineering finance division is able to tailor a capital release scheme to unlock some of the equity within existing machines and other equipment, which can then be used as a cash deposit to support new investment, or existing finance agreements can be restructured to allow new investment to take place while preserving the cash-flow outgoings of a business.

From a new 2500ft2 office on the outskirts of Chester, a 27-strong team offers a variety of innovative and flexible financing solutions, often on behalf of suppliers who prefer their name to headline the options available to their customers.

The objective, says Porter, "is to encourage people to review the options open to them and to make the most of the opportunities a review will uncover".

Among these options are hire purchase, finance lease and operating lease agreements that can be tailored such that a minimal deposit or even no deposit at all is required.

All of these options provide Close Asset Finance customers, either directly or indirectly, with fixed monthly payments that are readily affordable.

"We are happy to consider a wide variety of agreement structures," says Porter, "taking into account the deposit, the repayment structure required and the term of the loan.

But whatever is proposed, we are aware that it is in neither of our interests for a customer's business to go to the wall.

It is, however, in both our interests, and that of Britain as a whole, for a customer's business to survive, and better still, to be in a position to invest, grow and succeed.".