Somerset Capital Group
is a very well established lessor, based in Connecticut, US, with
its roots firmly in the operating lease space. As a well-funded
independent company with offices across the US, Canada and the Far
East, but not the UK and Europe, there were obvious gaps in
coverage.
What was not so
obvious was that this was absolutely the right time to go about
starting a business. With the euro in virtual meltdown, shuddering
from crisis to crisis, and the UK in the throes of an austerity
package, there was a natural view that now was the time to batten
down the hatches.
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However, first
experiences over the last two months of being open for business
would suggest that quite the opposite is true. Having the right
product at the right time certainly helps. Somerset takes a
pragmatic view when setting and taking residual risk positions and
this “equity” approach certainly helps in product differentiation.
As an independent financier we are playing a complementary, not
competitive, role with regard to most lessors and this is certainly
the case with captive leasing companies.
Accounting changes
which have been mooted will mean that a third-party equity provider
in the operating lease structure adds a great deal of value in
terms of profit recognition at a cost that is easily borne within
the deal-pricing metrics.
There has been quite a
bit of reorganisation in the asset finance sector. However, being a
new player with an old face has meant that we have a friendly
audience when making these new business calls.
Brokers are very
welcoming, as a new source of funding is always a prize, but beware
the scourge of the bottom drawer deals that have been languishing
there for a few months gathering dust. There is an education
process that has to be gone through where, after you have
established what is the perfect Somerset deal, you need to impart
that knowledge on the broker. Part of this process is also finding
where the boundaries lie and where the envelope may be
pushed.
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By GlobalDataThe company aims to
expand the UK operations and migrate infrastructure from the US,
however, being employee number one there is an element of “chief
cook and bottle washer”, with time zones leading to some long days.
As well as sourcing new business and establishing banking
relationships, one has to deal with some of the more mundane
aspects such as documentation and stationery, none of which is
particularly arduous, it is all part of the fun, and it is fun, of
starting a business in trying economic times.
There certainly is good quality
business to be done in the UK market, and a true rental product has
a high degree of saliency at a time when companies are hoarding
cash and reluctant to make long term commitments.
Roy Royer is head of
business development Europe with Somerset Equipment Finance
(UK)
