Jeff Addison Argues that Asset Lenders Need to Restore Their Credibility
Are we witnessing the start of an extraordinary transformational change in the way in which asset finance is regarded in the UK and perhaps across Europe?
The recent confirmation by one of our largest and most profitable banks, that it will no longer directly provide asset finance/leasing to SMEs (defined as those with a turnover of less than £5m) because the ‘need’ wasn’t there, is certainly a transformational change. The immediately obvious benefits to the customers of this change, however, are somewhat difficult to discern.
Of course, the bank will continue to offer ‘more suitable solutions’, although that must be qualified by questioning for whom the solution is more suitable – surely that won’t be the bank, will it?
Cynicism, as we know, plays no part in banking strategy formulation – it is always about the customer and their needs. Although some might argue that deciding what the customer needs, rather than asking them what they would like, does rather seem to be at odds with the concept of service.
Enter the Zil
The old USSR communist-era state limousine of choice was the Zil, but only because there was no alternative. With the fall of the USSR, and given the opportunity of choice, it quickly and unsurprisingly became a luxury Mercedes and has remained so.
Remarkably, the Zil now appears to be making a comeback and only last month Medvedev and Putin were reported to be investigating a possible revival of the iconic marque to replace those super Mercedes. This I mention, only to demonstrate the entirely circular nature of practically everything.
I’m quite sure that before too long someone, somewhere in banking strategy land, will fondly recall the old days when businesses, especially that multitude of smaller companies at the heart of the economy, actually needed to finance an asset; perhaps a telephone, an IT system or some printing equipment.
They didn’t need a loan with all its complications and implications, or an increase in their overdraft with its potential for instant renegotiation, reduction or removal. No, what they needed was a simple, fixed-rate facility, over a sensible term, swiftly approved and if possible to be seen as an additional line of credit. It would be quickly established and documented, perhaps with an easy to understand and complete, single page lease. The whole process from making the decision on the asset to approval of the finance might even be measured in hours.
“Eureka!” – says the bank strategy team, “it must be done because the customers need it, and furthermore let’s have specialists on the team who actually know and understand asset financing.”
Once such a decision is made, perhaps a small step will be taken on the road to restoring some credibility in asset finance as a valuable, flexible economic tool. In the meantime, keep an eye out for the return of the Zil to the streets of Moscow.