In response to the economic
turmoil, Investec Asset Finance (IAF) has dramatically changed its
policies for accepting business from brokers.
Details of these new policies have been
outlined by IAF in a letter sent to its entire broker network on
February 20.
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Noting the “unprecedented market conditions”,
the letter, signed by Phil Ross, head of vendor finance at IAF,
sets out a long list of policy changes to be enforced with
immediate effect.
Apart from the public sector, maximum deal
sizes, including existing group exposure, are now set at £25,000,
with maximum terms of five years for everyone.
Directors’ guarantees are also now mandatory
for all limited company transactions where tangible net worth is
less than to £100,000, and for all limited companies and limited
liability partnerships which have traded for less than five
years.
Yields are also detailed for new-start
entities – 18 percent for companies trading less than three years,
and 15 percent for companies trading three-to-five years.
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By GlobalDataThe letter also set out brokers’ commission
ceilings. For deals under £5,000, maximum commission is 7.5
percent; and for deals above £5,000, maximum commission is 5
percent.
IAF is also pulling out of an extensive list
of sectors.
Ross notes in the letter: “Please note that
with immediate effect we will no longer consider proposals for the
following sectors: cafés, bars, restaurants and fast food outlets;
hotels and guest houses; gyms and fitness centres; newsagents and
small convenience stores; real estate and related sectors;
independent financial advisors; small high street outlets;
construction; and travel agents.”
In addition to pulling out of these sectors,
the letter added that the lessor would no longer underwrite certain
assets classes, either. These were: catering, audio visual, shop
fittings, vending, and tagging/retail security.
Ross added, however, that “common sense will
continue to prevail” and that “should you have a strong credit from
a long standing source, Andy Higgins [IAF’s head of risk] will be
prepared to consider an exception to these new guidelines”.
Brokers are also expected to maintain at least
a 50 percent acceptance rate, “in order to keep our operating costs
to an absolute minimum.”
To help brokers maintain the minimum standard,
IAF will provide brokers with “comprehensive data” on a monthly
basis.
Commenting on the letter, Ross told
Leasing Life: “The letter is directly related to the
market conditions. Investec Asset Finance is a long-term player in
the market, but we have to adjust policies to reflect the current
market situation.
“There isn’t anything complicated – we are
relatively new, and just as we have started to move into our growth
years, we find ourselves trading during an economic slowdown of
unprecedented levels.
“Because many other funders have withdrawn
from the market recently, there is a level of demand out there that
is far beyond our appetite, so we needed to put filters on new
business.”
