The majority of commercial finance brokers say they have seen little to no change in the willingness of lenders to fund soft assets, while two-in-ten say conditions have worsened.
Latest survey data from Asset Advantage has revealed that 68% of commercial finance brokers have seen no significant change in appetite among lenders to fund soft assets such as software, telecoms equipment, office furniture or soft furnishings.
Compared to hard assets, such as machinery, vehicles and heavy equipment, soft assets are considered less secure due to their lower residual value. Despite this, they generally include business critical equipment, yet brokers continue to face difficulties in finding appetite among funders.
One broker said: “Similar appetite to fund soft assets in the market, in fact it has not seemed to have changed much over the last 10 years.”
More than 20% of brokers said conditions have worsened. Replying to the survey, one said: “Funders are becoming more specific on the assets they will fund and this naturally moves the range of assets away from soft. Only a few consider soft assets and their balance sheets have to be robust.”
All is revealed in the latest survey from Asset Advantage, one of the UK’s leading independent providers of business finance for SMEs. The survey questions commercial brokers on a range of topics to determine the state of play and changing demands of the commercial finance market. The aim is to uncover the key challenges facing commercial brokers when securing funding for clients as well as their thoughts on lender appetite and the lending landscape.
Asset Advantage has been providing business finance for hard and soft assets for more than 17 years, by way of asset finance, but also through business loans of up to £1 million. Launched a decade ago, its business loan offering is also used for business acquisition, management buy-outs and buy-ins.
Philip Knight, credit and risk director at Asset Advantage, said: “Soft assets can sometimes be challenging for brokers to fund and our latest data shows that it doesn’t seem to be getting any easier. It ultimately comes down to the funder’s approach to risk and how willing they are to look beyond equipment valuations and to the credibility of the proposal and the business behind it.
“Our approach to funding has always been more than just considering an asset’s value and taking a wider view of the business, the lending proposal business case and any additional security that might be offered. We think that this more granular approach to credit enables us to get to soft asset deals that some other lenders might choose to avoid.”
