The asset finance market reported new business of more than £3 billion in June, according to the FLA’s latest figures. And although that was 3% lower than in the same month in 2017, new business grew in the second quarter of 2018 by 5% compared with the same period a year earlier and was up by 1% in the first half of 2018.
Some sectors are performing better than others. In Q2 2018, new business provided for agricultural equipment grew by 21%; while new finance for construction equipment and for production and process equipment fell by 2% and 3% respectively, compared with Q2 2017. In a recent UTB broker poll, Asset finance brokers who responded indicated that in their view the three sectors offering the most opportunity for growth over the next 12 months are 1) construction plant and machinery, 2) manufacturing and engineering machinery and 3) light haulage. It will be interesting to see if they’re right.
The first estimate of Q2 2018 GDP published by the Office for National Statistics (ONS) showed that business investment grew by 0.5% compared with Q1 2018, 0.8% higher than in Q2 2017, but still the weakest growth rate since Q4 2016. Continuing Brexit uncertainty is a prime suspect as the cause of a slow-down in business investment and with so much still to agree who can really be that surprised?
More welcome news is that the broker channel continues to grow more quickly than the direct and sales finance channels with new business reported growing by 13% In Q2 2018 compared with Q2 2017. Vendor finance grew by just 3% and there was zero growth in direct finance. The performance of the broker channel is even more impressive given that competition in most aspects of the asset finance market is fierce.
As most readers will know, UTB is a ‘broker-only’ asset finance lender. Even if we do receive a direct approach we refer the potential customer to a suitable broker to ensure they receive good advice. If the broker subsequently proposes a deal to us that’s great. If they don’t, we’re big enough to understand that there must have been a good reason why not. What we will never do is try to sell directly to your customers.
Going off rate-card
The future of our business is dependant on the success of our broker partners, so we do all we can to ensure the service we provide helps them to retain existing customers and attract new ones, especially if the challenge is coming from direct and vendor sales forces. That can mean going off rate card for the right deals with strong credits and matching the price and commission on offer. We’re not racing to the bottom on pricing but there are some occasions when we can put together a bespoke price and commission package still backed by the same outstanding service.
We know It’s rarely just about price. Often, the speed of decision, turnaround and pay-out is more important and can be the difference between winning and losing customers. So if you’re after direct access to underwriters, quick credit decisions speedy completions and a willingness to be flexible on pricing for the right transactions, we’re hard to beat.