Director Tony Devenney praises
tier 3 funders as the unsung heroes of the downturn. Liz Bury
writes.
Go deeper with GlobalData
UK broker and
funder Kennet Equipment Leasing has unveiled strong figures for
last year, and noted that funders’ appetite has started to
return.
Volume at the garage equipment
specialist was up by 47% to £28m (€32.5m) in 2010, compared to £19m
in 2009.
“I don’t want to tempt fate. It’s
easy to be up on 2009 because it was a tough year,” said director
Tony Devenney.
“We have stayed in the markets we
know – forklifts, waste compacters, garage and cleaning
equipment.
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By GlobalData“The margins are still tight but we
can make a decent return.”
ING, Investec, Siemens, and own
book together account for about 80% of the volume, with funders
like Arkle and Close, and Armarda, Gams and Kingsway making up the
rest.
Devenney said: “Funders’ appetite
is starting to return; they are definitely opening the door and
looking for business again.
“There is a
marketplace for another tier 1 funder to funder to write good
quality business and to make excellent returns.” This is because
existing funders may already have enough exposure to a particular
customer.
Business with several funders
increased strongly during the year, such as 1pm with which volume
rose to £1.5m, up from £300,000 in 2009.
Volumes with Close were around £2m,
and volumes with Investec doubled compared to 2009.
Devenney said: “Investec was one of
the biggest in 2010, it had the liquidity.”
Kennet added £3.5m of business to
its own book in 2010, taking its receivables to £7.5m.
It expected to add a further £5m
during 2011.
“Businesses are buying on a
‘need-to-have’ basis. Garages, for example, cannot trade
effectively without the correct diagnostics systems or vehicle
lifts. Virtually every piece of equipment we fund is essential,”
Devenney said.
However, volumes were thought
unlikely to return to pre-2008 levels for at least two years.
Default levels dropped during the
year.
Devenney said: “It is encouraging
to see default levels drop, but this is not surprising, given the
underwriting policies adopted over the last few years. Everyone has
looked at the deals that have gone wrong and taken what they can
from that.”
He added: “One of the main reasons
our conversion rates with our funders are so high is that we speak
to every customer, whatever the size of the deal.
“It is vital to get as much
information as possible from customers.”
The company works closely with a
number of specialist dealers to promote asset finance to
customers.
Between 60% and 70% of Kennet’s
business is with sole traders, and Devenney praised all the funders
operating in the SME market as the unsung heroes of the
downturn.
