Special Asset Finance
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Special Asset Finance
Scott West talks us through specialist asset finance and answers some frequently asked questions.
What is specialist asset finance?
It’s fairly simple. An asset is anything that can be valued and lent against – including watches, cars, art, jewellery, boats, helicopters and other luxury assets. Assets can also be machinery and equipment, for farming or manufacturing. It ranges from the things you’d have at home to the things a business would own for production and business purposes.
Lending against the assets will change depending on what they are and where they fit, but in principle, the finance is the same.
How does specialist asset finance differ from traditional finance options?
The process is quite similar. I tend to think of it in a very similar format to a standard mortgage. You submit an application with an approximate value of the asset – a bit like valuing a house.
The asset will need to be valued in most cases, and there are various ways of doing that, depending on how specialised the item is. Watches, jewellery and art are quite easy to have valued by professionals. Manufacturing equipment and farming equipment can be a bit more difficult. There’s a niche market for those things, which can sometimes limit the valuation.
An asset might have been purchased for a fixed amount, but its resale value could be lower. If you have a £100,000 antique at home, somebody might buy it quickly if you have to sell it, but if it’s farming equipment, it’s less liquid and less likely to be a quick sale. That may affect pricing and valuations.
What types of assets qualify for specialist asset finance?
It really does vary. Most things can be considered assets to some extent. I would probably say that anything less than £10,000 to £15,000 probably wouldn’t be worthwhile financing.
You’d probably be better off with a personal loan for things like that. Meanwhile, watches, jewellery, art, cars, motorbikes, helicopters, planes and yachts, all the way through to very niche manufacturing equipment, can qualify.
What are the benefits of specialist asset finance? Are there any drawbacks?
Specialist asset finance has its benefits. It’s relatively quick, and for luxury assets, it’s very easy to value. So, the process can be very quick. It’s comparable to a bridging loan versus a normal standard term mortgage.
You can have the money within five to 10 days, depending on the asset’s availability to value. It’s usually a short-term loan rather than long-term, so you might have a loan for 12 to 24 months, and you can repay it whenever you like. It’s usually an easy process.
The drawback is that it isn’t really suitable for long-term lending. If you have very high-value assets, such as cars worth £100,000s, using them for long-term loans isn’t appropriate. You’d want to look at different finance for that.
Can specialist asset finance be used for both personal and business purposes?
Yes. Some of our clients use asset finance for personal car purchases, luxury cars, watches, and some jewellery. We also have other clients who use it for business purposes. They use business assets, like manufacturing equipment, to acquire more machinery. It’s absolutely applicable for both purposes.
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How does the application process for specialist asset finance differ from traditional finance options?
I liken it to the mortgage process to make it easier to understand. We assess the asset up front, much like we would get a house valuation in the mortgage process. You fill out a basic application form, confirm the assets and liabilities, and then it goes to an underwriter for evaluation. It’s fairly similar.
What interest rates and fees are associated with specialist asset finance?
Interest rates and fees can vary quite widely depending on the asset and its liquidity. For example, luxury items like watches and jewellery can have lower interest rates and fees because they are easy to sell.
On the other hand, more complex items like machinery, especially those with limited resale markets, may have higher rates and fees. Generally, interest rates may range from around 5% up to 11% per year, with a typical 2% arrangement fee.
How long does it typically take to receive funding for specialist asset finance?
If everything is in order and we’re all on the ball, funding can be quite quick. Luxury items can have their finance approved within ten days, while more complex items like machinery might take around thirty days. So, it’s fairly quick in most cases.
What happens if the borrower defaults on their specialist asset finance loan?
Similar to a standard mortgage or bridging loan, the lender will typically give you a period of time to resolve the issue as long as you’re communicating with them. They might apply a default or penalty interest rate. In the event that you’re unable to service or repay the loan, they will take ownership of the asset and sell it to repay the loan.
Can specialist asset finance help individuals or businesses with poor credit history?
Yes, as with mortgages, the better your credit rating, the simpler and cheaper the process will be. However, even if you have bad credit, you can still obtain specialist asset finance – but do keep in mind that interest rates and terms may change depending on how bad the credit is. We can quickly advise you on any difficulties you might face with a lender.
What else do we need to know about specialist asset finance?
Just that if you have some luxury assets at home and are thinking of using them, let us know. Give us a call, and we can guide you through the options available. It might be that you’re looking to finance a new car, and there are bespoke car financing options available.
It doesn’t have to be a £500,000 Rolls Royce; it can be a top of the line BMW. Extremely high-value assets aren’t required for asset finance to be applicable.
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