Use your assets

Alexander Baldock reveals why asset finance can help you and your franchise to grow

The franchise industry is in a defiant mood. Against the backdrop of the Chancellor’s acknowledgement that the UK’s economic recovery is likely to be “longer and harder” than hoped, the sector remains determined to equip itself to not only weather the storm, but to emerge as a competitive and profitable industry that will support the UK economy to get back on its feet.

This positive and confident approach is reinforced by research undertaken by NatWest, which along with Lombard, is part of The Royal Bank of Scotland Group. The research findings indicated that 87 per cent of franchisors are planning to expand in the year ahead. The question is how these franchisors and their franchisees go about funding the equipment to make their plans a reality?

One solution is provided by asset finance. This provides the means to fund investment, while providing more control over cashflow, preserving working capital and often reducing the total cost of using an asset. Despite the association between asset finance and wheeled assets, often in the form of contract hire or finance lease agreements on cars and vans, asset finance can be used for almost any asset, whether IT equipment or plant and machinery.

Yet some businesses still purchase equipment using an upfront cash payment, without realising the potential impact this may have on their future financial stability. An unexpected change in market conditions, or a severe depreciation in the asset value, can leave them without the financial reserves to cope. Asset finance can be tailored to suit the needs of a particular franchise, their budget requirements and the asset’s life cycle.

Asset finance enables the franchise to retain flexibility. Monthly payments are only made for as long as the asset is used. If at the end of the contract it is no longer required, the asset finance company takes care of the sale or disposal while protecting the business from the impact of depreciation. In the case of IT equipment, asset finance can be used to support regular upgrade cycles that can reduce maintenance costs, and includes management of WEEE (waste electrical and electronic equipment) compliant disposal by the asset finance company.

This form of funding also allows both franchisor and franchisees to plan for the future by eliminating costly surprises. This is because the rental on the asset and the payment of interest is fixed, allowing the business to plan its future with certainty. A franchise considering asset finance would not need to worry about identifying security. When using asset finance, the security is already in the assets being funded. This speeds up the process and enables the customer to acquire businesscritical assets when they need them most.

In the current economic climate, asset finance companies have the advantage of being able to make quick credit decisions because they don’t usually require extra security. Although it is important to emphasise that the earlier you engage with an asset finance provider, and the greater understanding they have of your business, the quicker they can act and turnaround your funding request.

Andy Aitkinson explains: “Taking the asset finance route enabled us to make our expansion plans a reality and by using a hire purchase solution to kit out our new store, we were able to move ahead with our plans very quickly.”

With 75 per cent of franchisors expecting better prospects in the next year, asset finance offers these businesses the opportunity to take full advantage of their competitive potential and to equip themselves to secure future success and profitable growth.

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