Having multiple funders may seem like a pain, especially when dealing with one bank can be challenging at times.
Historically we mature in business by being taught that a bank can provide multiple products, becoming a one stop shop for all financial needs.
Whilst easy at first, SME’s tend to find that the more products they have with one funder, the harder it is when:
- limits hit a peak exposure
- the business needs to expand or contract based on market conditions
- you want to limit risk to the family home
- you need cash flow flexibility
Whether your business uses the term CAPEX (Capital Expenditure) or simply uses the term new equipment, splitting your risk across multiple funders when funding new equipment can provide a greater level of flexibility with less security and often the same pricing/cashflow objective.
Why multiple funders is important?
- each piece of equipment is funded stand alone without additional security
- The funding is aligned to the asset life cycle to ensure the business is efficient, considerate of replacement time frames and ensures that maintenance costs do not blow out
- Multiple tranches of equipment finance can be used for high growth companies with risk split across multiple funders (vs 1 funder taking all the risk)
- family home can be excluded from funding limits mitigating the risk to a primary asset
- No GSA’s (general security agreements) are used over the company assets, ensuring one bank doesn’t have your business over a barrel
- When the market turns (and it does) assets can be sold and repaid to provide flexibility in a downturn, without the need to beg and plead with 1 bank that may hold all assets under an all encompassing GSA
Understanding how a specialist equipment finance broker can be used to leverage their knowledge of a panel of funders, ensures you get the best deal that includes price, flexibility and the ability to grow on your terms.
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Author – Matt Corkin Head of Broker Atlas EF