Month: December 2013

Advice for farmers on switching banks

Many farmers may think about it but relitively few move their main business banking from one bank to another. If you’re considering moving banks, these tips could help you with the process.

While agriculture is still very much a favoured sector for banks to lend to, the ability to service and repay borrowing is increasingly important, despite the security of rising land prices.

Banks are under pressure to build their capital accounts and reduce their risk profile so borrowing takes longer than in the past to organise.

Lenders are also making more use of covenants that impose performance conditions on the borrower’s business. Failure to meet these requirements can result in the facility being withdrawn.

In general, bank structures are more rigid and prescriptive than those of a few years ago and bank staff who may have been able to sanction certain levels of lending in the past often no longer have that authority, says Ashley Clarkson, director of agriculture at accountant Grant Thornton.

“Banks don’t like surprises so keep your bank informed about what’s going on in your business – build the relationship not only with your own bank but get other banks on to the farm to get to know your business and use them as a sounding board.”

Why switch?

Common reasons for farmers wanting to change banks include new enterprises that the current lender does not want to fund; changes in staff or relationships are also common drivers, as are generational changes in the farming business.

Most farm overdraft margins are at about two points over base rate, having been on average cheaper than this in the past.

“Banks are looking for bigger margins over base now because while their lending is at a margin over base, their borrowing is related to the London Interbank Offered Rate [Libor] and these rates have increased.”

This means that fees and other charges have also generally increased. “If you have a sound business, there will be competition for your banking custom and you may be able to negotiate some reduction in fees and charges, for example getting the bank to take on some of the charges such as the cost of valuations,” says Mr Clarkson.

“When considering moving, look at the overall cost, not just the headline lending rates – and get the bank to set out exactly what all the elements including any fees and charges will be – it may be that what looks like a cheaper offer ends up costing the same overall because of the extras.”

Those looking to move their overdraft need to provide information on how much will be needed, for how long and why, accompanied by a good cashflow forecast and a budget, says Mr Clarkson. This will need to demonstrate some sensitivity to input and output price changes along with technical yield and output fluctuations.

Loan repayments

One main change over the past five years is the increasing desire of the banks to see loan repayment structures put in place, says Mr Clarkson.

“The main banks are now very reluctant to do interest-only deals and lending is far more likely to be over a shorter term – say 10-15 years rather than the 20-25 year deals on offer just a few years ago.”

Where loan facilities are sought, deeds and related documents such as tenancies need to be in order and to hand so that the provision of security is straightforward. “Consider also how the need to repay the existing facility will impact cashflow and watch out for any penalties associated with repayment.

“Make sure accounts are up to date, have good historic performance figures available for the business and be clear about the long-term objectives, including succession.

“Once you have seen a range of banks it is up to them to come back to you with a proposal – if they are keen to win your business there will be some flexibility and elements of negotiation – you might be able to stretch the repayment profile, for example,” says Mr Clarkson.

“People do get hung up on margin over base rate but that may not be the key. Also, don’t necessarily try to get the biggest overdraft – think about putting some of it on loan because with a loan you are only paying one arrangement fee – with an overdraft there will be an annual renewal fee which is percentage-based and relates to the size of the facility.”

Infrastructure and support

Find out what the infrastructure and support is like with any new bank too, says Mr Clarkson. “It may not have the resources or systems of other lenders. Can you bank online with it, what is the branch structure like, who would you be dealing with, what’s the experience of other farmers who bank there? If your business handles a lot of cash, what are the practicalities of this with a new lender?”

Once a decision to change has been made, switching a current account should be relatively straightforward although fixed and floating charges associated with farming overdrafts mean that it often takes longer than the seven days promised by the banks.

The transfer of direct debit and standing order obligations are handled by the banks as part of the switching service but other issues such as tax and VAT payments need a careful watch, as do insurance payments and seasonal or one-off income such as ELS or HLS payments.

Credit rating

Beware of anything that may impact your credit rating if it is not paid on time, warns Mr Clarkson. To avoid this, consider keeping the old account open for a few months with a contingency fund.

Delays to a bank switch most often occur in the transfer of security. “Documents are not always as up to date as they should be – there may even have been a transfer of assets between generations since the last time security was used for borrowing.”

Driven by poor returns on cash deposits, peer-to-peer lending is growing, offering competitive working capital lending and a better return than traditional banks are offering for depositors. However this is usually short-term lending of six to nine months, says Mr Clarkson.

He warns that it is not uncommon for people to change their mind about moving banks at the last minute because they discover at this late stage that they will have to pay large penalties for getting out of their existing arrangements.

Not only does this waste time and effort but by this late stage the relationship with the existing lender may also have been damaged by the plan to move banks.

UK construction output rise 2.2% driven by housebuilding

Rise in construction output likely to add an extra 0.1 percentage points to third quarter GDP, says ONS

UK construction output grew solidly in October, led by the biggest rise in housebuilding in more than two years.

An upward revision to construction output in the three months to September is also likely to add an extra 0.1 percentage points to third quarter gross domestic product growth, the Office for National Statistics said.

Construction output rose 2.2pc on the month in October after a fall of 0.5pc in September. On the year, output is up 5.3pc, slowing from an 8.2pc increase in September, which was the biggest since January 2011.

This marks a big turnaround from 2012, when construction output fell by 7.5pc and was a major drag on overall growth, despite its small share of just over 6pc of the economy.

Separate private-sector surveys had reported the biggest expansion in construction activity in over six years in October and November, and Friday’s official data also suggest the sector will make a strong contribution to overall economic output.

Britain’s economy grew by 0.8pc in the three months to September, the strongest quarterly growth in three years, according to an early estimate, and further revisions will be published on December 20.

The turnaround in construction this year is down to a marked revival in house-building, driven by a government scheme to aid buyers of new homes and a rebound in house prices, which are up nearly 8pc on the year according to mortgage lender Halifax.

This is the biggest rise in over six years, and fears of a possible bubble prompted the Bank of England late last month to announce it would scrap the part of its Funding for Lending Scheme that supports mortgage lending.

But this alone is unlikely to stop further rises in house prices. The government expanded another scheme to help home-buyers with low deposits in October, and in a set of economic forecasts last week it predicted that house prices would rise by a further 5pc next year and by 7pc in 2015.

The ONS said that new housing grew by an annual 18.6pc in October, the biggest rise since January 2011.

However overall construction levels remain well below those seen before the crisis, and what economists think is needed to meet demand.

Just 135,000 homes were built in the year to April 2013, down from the more than 200,000 homes a year that were built in the years running up to the financial crisis, government figures show.

Most other construction sectors have yet to return to solid growth. Infrastructure building is 2.8pc lower than last year, public building works are down by 6.8pc and private industrial work is 26.0pc lower. Private commercial work is growing at an annual rate of 8.7pc, however.

The government’s Office for Budget Responsibility predicts a pick-up in business investment next year, and last week the government also said that insurers were willing to commit £25bn to long-term infrastructure projects.


Asset Refinance

Could Refinance help your business?

Richmond Asset Finance arranges refinance options for our clients – another way we can help where mainstream funders fail.

Where you already own a vehicle, plant & machinery, static or moveable plant, whether new or up to 20 years old there is a small amount of finance outstanding, an arrangement can be made to repay the existing lender and refinance the asset. It’s an ideal way of raising cash against wholly owned or partly financed vehicles, plant and machinery.

Re-financing may be required to fund a deposit on a larger purchase or purely raising additional capital for cash flow purposes on a Non Status basis. Limited Companies, Partnerships or Sole Trader, whatever the case, we can help!

Typically, cash can be used to:

  • Purchase more plant and machinery / Raise deposits
  • Cash injection / Working capital for new contracts
  • Refinance existing loans

Assets considered:

  • Commercial Vehicles / Trailers List
  • Agricultural Machinery & Tractors
  • Coaches & Buses
  • Vans & Cars
  • Contractors Plant
  • Engineering Equipment
  • Print & Print Finishing Equipment
  • Packaging & Labelling Machines
  • Woodworking & Plastic Injection

The above list is not comprehensive, even if the asset is bespoke, we may still be able to help. All deals considered from £15,000 – £5,000,000. Most transactions are typically Hire Purchase or Finance Lease, with periods being between 12 – 60 months. All transactions are considered on individual merits. Lenders will take a view on CCJ’s, Defaults and Phoenix Companies.

We can look at refinance on either a stand-alone basis or on a joint basis incorporating Invoice Finance. Rates are lower than many other available and can be tailored to meet your needs.

Lease Finance

Lease Finance – A flexible way to finance

A lease helps you keep your options open when you acquire an asset, by not committing yourself to ownership. So if it’s flexible financing you’re after, our lease finance facility could be the way forward.

How does lease finance work?

We buy and own the asset and you enter into an agreement to hire it from us at an agreed rental over a set period. This may be a more tax efficient way for you to have use of the asset.

You also have the option to retain use and possession of the asset when the lease contract ends – potentially at a price agreed at the start of the lease period. Alternatively, you can sell the equipment for and on behalf of the leasing company and retain the vast majority of the sale proceeds as a rebat of rentals.

At the end of a leasing agreement, the asset is sold and you receive the major share of the proceeds. As the asset owner we claim and reflect any available writing-down allowances on the asset purchase in lower monthly lease payments.

Finance Lease is different to Hire Purchase. Initially when the asset is purchased, you will only pay the VAT element on the deposit / initial rental that you put down. The finance house will pay the remainder of the VAT on the purchase price. Your monthly repayments are for a fixed period and generally a fixed rate. However, your monthly repayments will attract VAT, which you reclaim in your Quarterly / Monthly VAT return.

However, at the end of the ‘primary period’, you have various options:

  • Sell the goods to an independent third party and will be offered the majority of the sale proceeds. (Sale price must be agreed with the finance house)
  • Enter into a Secondary Rental Period and generally pay 1* monthly rental on an annual basis and never own the goods. (*Secondary Rental Period varies with different finance houses. The star denotes that it is not always 1 rental.)
  • Return the asset to the finance company.

Key highlights:

  • Low up-front costs – you pay a small deposit and can use the asset immediately
  • Flexible repayment structure – rental payments can be tailored to match your cash flow
  • Fixed or variable interest options – you decide which suits you best
  • Tax advantages – as well as reclaiming VAT, you may be able to claim capital allowances and also offset repayment interest against profits (special rules apply to cars)

Assets you can typically acquire with lease finance

  • Fork lift trucks / aerial work platforms
  • Construction equipment
  • Cars and vans
  • HGVs
  • Buses and coaches
  • Plant and machinery
  • Agricultural equipment
  • Information Technology & Office Equipment
  • IT equipment

Unsure whether leasing is beneficial for your business? Call us today to discuss your requirements and we can inform you of all our asset finance options and can come up with a solution to best suit your business needs.

Hire Purchase

Protect your cashflow with Hire Purchase

Unwilling to spend a large amount of capital on an asset in one go? Our hire purchase facility means you can pay for it in manageable installments, spread over a period of time. A convenient way to buy – with Hire Purchase

Hire Purchase is a simple, well-established way to finance the acquisition of equipment and machinery for your business. You pay an initial deposit, and then the balance and interest through regular


Hire Purchase/Lease Purchase is a straight forward finance arrangement where you pay for an asset in monthly installments, generally over a fixed period of 24 – 60 months with also a fixed interest rate.

The VAT element of Purchase Price in paid upfront by you, along with any deposit you may also be putting in. You will re-claim the VAT element in your quarterly / monthly repayment. Sometimes there may be a nominal fee / option to purchase fee at the end of the agreement, but this amount is generally modest and always known at the point of signing any documentation.

With Hire Purchase, the asset stays on your balance sheet, the monthly repayments do not attract VAT and any interest charges can be offset against profits for taxation.

Assets you can typically acquire with hire purchase:

  • Cars
  • Commercial vehicles
  • HGVs
  • Buses and coaches
  • Plant and machinery
  • Agricultural equipment
  • Construction equipment
  • Materials handling equipment

Key highlights:

  • Total control – you own the asset at the end of the agreement
  • Simple, regular repayments – for easy budgeting
  • Choice – you can decide on fixed or variable interest options
  • Tax advantages – as well as reclaiming VAT, you may be able to claim capital allowances and also offset repayment interest against profits (special rules apply to cars)
  • Flexibility – you choose how the finance is structured: with a flexible deposit, fixed payments and perhaps a balloon final lump sum.
  • IT equipment

OFCOM says TV payday loan adverts have hit 400,000

Television viewers were exposed to nearly 400,000 payday loan adverts last year, according to the regulator, Ofcom.

In 2011 there were 243,000 such adverts, increasing to 397,000 in 2012, a rise of 64%.

On average, each adult viewer saw 152 such adverts in 2012, while children watched 70.

Labour has already called for all such adverts to be banned during children’s TV programmes.

“I don’t want payday lenders taking advantage of the cost of living crisis and targeting children in this country,” said Ed Miliband, the Labour leader, last month.

The Financial Conduct Authority (FCA), which takes over as the regulator of payday loans in April, is considering other restrictions on advertising.

A consultation on the future of the industry closed last week.

The government has already announced that charges and interest rates on payday loans are to be capped.

The FCA will decide on the maximum level of such charges, which are likely to be introduced in 2015.

[BBC News]

UK manufacturing expands at fastest pace in three years

Solid upturn in UK manufacturing driven by “substantial increases” in both manufacturing production and new orders, Markit-CIPS PMI survey shows.

Manufacturing returned to form in November as the sector steamed ahead with the fastest growth in nearly three years, following two months in which the pace of expansion slowed.

The reading of 58.4 on the closely-watched CIPS/Markit purchasing managers’ index (PMI) survey – where the 50 mark separates growth from contraction – was the best level since February 2011.

Monday’s figures are further evidence that the recovery is gaining traction, creating the best economic backdrop in three years for the Chancellor when he delivers his 2013 Autumn Statement on Thursday.

The growth in manufacturing included a strong level of export orders – with new work from Asia, the US, Germany, France, Ireland, Belgium and the Middle East – but the domestic market remained the prime factor in order growth.

It was the eighth successive month of growth in manufacturing. The expansion in new orders surpassed a 19-month high seen in August.

The data suggest that manufacturing is on course to beat the 0.9pc growth it notched up in the third quarter, with the pace of growth so far in the final three-month period of the year tracking comfortably above the 1pc mark.

Employment in the sector rose at the fastest pace since May 2011, signalling that companies are creating around 5,000 jobs a month.

Manufacturers’ input costs rose for the fifth month in a row but companies reported some success in alleviating the squeeze by passing these on to clients.

Rob Dobson, senior economist at survey compiler Markit, said: “UK manufacturing continued to hit the high notes in November.

“Manufacturing and the wider economy are on course to build on the third quarter’s solid foundations.”

David Noble, chief executive of the Chartered Institute of Purchasing and Supply, said it was an “all-round glowing performance” for the sector.

“The sector’s solid growth was primarily underpinned by a strong domestic market, boosting new business in the UK and giving manufacturers the confidence to look ahead to the future,” he said.

“This was coupled with new export orders from key overseas markets accelerating at one of the fastest rates since the financial crisis.”

Samuel Tombs, UK economist at Capital Economics, said: “The improvement in the UK CIPS manufacturing survey in November should help to ease concerns that the recovery is entirely founded on an unsustainable housing market boom.”

Howard Archer of IHS Global Insight said that if it is followed by robust PMI data from other sectors this week, it will look very likely that gross domestic product growth for the fourth quarter “could at least match” the 0.8% of the third quarter.

James Knightley of ING Bank backed the view that unemployment would drop below the key threshold of 7% around a year from now – a figure which would prompt the Bank of England to be able to consider lifting interest rates.


Calls for help with farm debts rise

The number of farmers in the south west seeking help for financial hardship is increasing, a charity has said.

The Farming Community Network (FCN) said it was dealing with a rise in cases in Devon and Cornwall.

Sustained wet and cold weather in 2012 is thought to be largely to blame for many farms in financial difficulties.

The FCN, which is dealing with more than 200 cases in Devon alone, said it encouraged farmers to seek help “before a problem becomes a crisis”.

‘Unsustainable’ debt

The FCN said that it had seen an increase in cases in Devon alone from 213 last year to 230 up to August this year.

Of the cases being dealt with this year, 90 were new, according to the charity’s figures.

In Cornwall in 2012, it was dealing with 121 cases.

More than half of the problems raised with the charity nationally concerned finance and for some debt was reaching “unsustainable levels”, it claimed.

Joanne Jones, a dairy farmer and FCN coordinator in Devon, said some farmers – often on small family-owned farms – felt isolated and were struggling with seemingly “insurmountable” pressures.

Farmer Tom Jeanes said he was forced into selling half his herd after flooding last year rendered his grazing fields “useless”.

“I doubt if I’ll make any profit this year at all,” he told BBC News.

“I’m only a very small farmer – and I’m not the only one… there are others who’ve lost far more than me.”

‘Reluctance to help’

The FCN said although 2013 had been drier, farmers were still dealing with financial problems caused by the previous 18 months of bad weather.

“We have had a better year this year,” Ms Jones said.

“The harvests have been better, but not enough to get stocks back up to where they need to be for this year and this winter.

“I think some of these issues relating to finances are to do with banking services and maybe some reluctance to help extend overdrafts and to carry on supporting farmers.”

Ms Jones said FCN was trying to encourage farmers to seek help.

“Sometimes we feel farmers don’t come forward soon enough with their problems,” she said.

[BBC News]

HSBC considers floating UK arm

Britain’s largest bank has been reportedly sounding out investors in recent weeks to gauge support for the idea to list its £20bn UK banking operation.

HSBC is considering floating its UK arm, ahead of new regulation that demands banks ringfence their retail banking operations.

Britain’s largest bank has been reportedly sounding out investors in recent weeks as to whether or not they would support the project.

There have also been informal conversations at board level to gauge opinion on the idea, the Financial Times reports.

The newspaper reports that people familiar with the matter, which is still in the early stages, have said the most likely plan would be to list a minority stake of up to 30pc in the UK retail and commercial banking operation.

Investors have estimated that the UK arm could float with a total market value of roughly £20bn.

The lender is said to be considering the IPO ahead of the incoming Vickers rules which will demand that banks ring-fence retail, which includes customer deposits and small business loans, from investment banking activity. While a formal separation is not required, experts have suggested that the bigger banks could go that one step further and completely spin off their retail unit.

“Given the trouble you have to go to to establish a self-contained operation, with its own capital and governance, you might as well go the whole hog and spin it off,” said one executive who knows HSBC well.

While the bank may be looking into floating its UK arm, the FT reports that its sources played down any suggestion that HSBC was looking to move its headquarters from London, with any questions of redomiciling “off the table”.

If the bank does go ahead with the stock market listing it would be the latest in a slew of banks to announce their intention to float.

Just yesterday it emerged that OneSavings Bank was examining a stock market flotation next year. The group, which trades under the Kent Reliance brand name, has reportedly started discussions with banks about a potential flotation that could give JC Flowers & Co, run by US financier Christopher Flowers, a way out of its investment in the company.

Meanwhile Lloyds Banking Group is preparing to float its TSB subsidiary next year with a valuation in the region of £1.5bn to £2bn, and Royal Bank of Scotland is planning to float a new challenger bank under the revived Williams & Glyn’s brand in late 2015.

[BBC News]

Asset Finance

What is asset finance?

Asset finance is basically a loan that is used to obtain equipment to meet your business requirements.

Whenever organisations invest in tangible assets, this is anything from office equipment to manufacturing plants or cars to a fleet of aircraft, they usually need an affordable, secure means of finance.

That’s exactly what the asset finance sector is all about. During these difficult financial times, Asset Finance has become the third most common source of finance for businesses in the UK, this is after bank overdrafts and loans. It is also of growing importance in the public sector.

Why use asset finance?

Asset finance can be a flexible alternative to a traditional bank loan, providing significant cash flow and tax benefits for businesses looking to purchase a new or used piece of equipment, a vehicle or other fixed assets.

Who Uses Asset Finance?

Asset finance accounts for the majority of debt-financed business investment.

Around one in three small businesses that have any external borrowing use asset finance. Amongst these, the use of asset finance is particularly high in Wales (54%), the North East (46%) and the North West (42%) with agricultural and manufacturing making most use of leased equipment.


Asset finance is:

  • A valuable alternative to conventional bank loans
  • Secured wholly or largely on the asset being financed, reducing the requirement for additional collateral
  • Secure for the user, as the finance cannot be recalled during the life of the agreement
  • Sustainable because businesses have the option to replace or update equipment at the end of the lease period.
  • Widely available through a network of around 5,000 equipment dealers and 400 brokers, as well as direct from finance companies.

We have over 20 years worth of experience in the Asset Fiannce sector and can finance new or used equipment. We can place many more, even if bespoke. Transactions are always considered on their individual merits. Deposits, Period & Rates of Interest depend upon the strength of the proposal. We also deal anywhere in the UK!