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The NACFB is the only UK trade body dedicated to the commercial finance broker. We represent members from across the whole commercial finance market: from buy-to-let specialists and commercial mortgage advisers to vehicle finance brokers; from leasing and asset finance specialists to factoring brokers. All NACFB members comply with an industry recognised Code of Practice
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Credit Squeeze
15th December 2007
Leasing Life
January Edition
Credit Squeeze
The effects of the credit squeeze continue to make the headlines and despite a cut in the Bank of England base rate, things are not looking to improve in the short term. Leasing and asset finance brokers are beginning to feel the effects of the crunch, although specialist brokers are feeling the pinch in different ways.
Vehicle finance brokers are finding conditions tougher as business becomes harder to place, rates are higher and underwriting terms get tougher. Deals which would have been dead certs twelve months ago now require a lot more information about the client to be supplied for underwriting purposes than it would have done previously.
Stefan Erentraut, owner of MVM Vehicle Contracts (one of our vehicle finance broker members as well as the head of the NACFB’s Vehicle Finance division) has seen underwriters look for full details of both company directors’ and private individual’s income and expenditure before a deal has been underwritten. He says that of the five deals submitted recently three have been returned with requests for supplementary information.
But brokers in leasing and asset finance away from the wheeled asset market are facing different challenges. Ray Wells, an experienced and long established leasing broker, as well as Director of Leasing and Asset Finance at the NACFB, said that the main issue facing leasing and asset finance brokers was the uncertainty in the market. He said: “It’s difficult to be sure whether individual lenders have tightened their criteria or not. I suspect lenders are looking at individual deals more closely than they were, but there have been no significant changes from the finance companies, yet.”
The main challenge has been one of finding new deals to place. “Because of the uncertainty in the market, people are putting off buying large assets, such as plant and machinery, until things have stabilised. The result has been that the volume of business has decreased for brokers. Deals and new customer are harder to come by.” Customers seem to have adopted a wait and see approach to the current economic situation, but Ray believes that there are reasons to be optimistic even so.
“Finance House Base Rate came down in November from 7% to 6.5% and Bank of England Base rate has also been cut. Some may argue that this is too little to late, but I believe the market will begin to correct itself.” Since then there has also been the unprecedented announcement of co-operation between the major world banks in order to boost confidence in the world economy and attempt to head off any recession fears by announcing new measures to inject extra funds into the financial system.
Out of these recent events, it has been alarming to note how vulnerable some of the biggest banks have looked in this crisis. Ray commented: “The current credit squeeze has been an eye opener in terms of how some of the largest banks, both in the US and here in the UK, are not invincible.” The effect is one of confidence – and despite all efforts this may take a while to return.
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