Leasing Life sheds light on
the assets you should be financing in a downward market
Home office leasing
With bank-owned lessors in the UK
being extremely cagey about funding unfamiliar assets, one of the
toughest positions to hold is that of a supplier setting up in
business with a completely original product, and hopes of building
a leasing sales model.
Most lessor risk managers want to see three
years of healthy balance sheets from a start-up supplier before
agreeing to fund a sales aid operation. But is this
a necessary precaution?
Speaking to a major UK broker this month, the
opinion was that if a supplier can be shown to have a responsible
sales model and a solid asset that can be distributed elsewhere in
the event of P&L difficulties, age should not be an issue.
Take, for example, OfficePOD, a UK-based
company featured at the Grand Designs show at London’s ExCel centre
last month. Essentially a small mobile office, the product is
designed to be sold to large corporates, which would then install
it in the gardens of employees working from home on a long-term
OfficePOD is on the hunt for leasing companies
to finance its products. The product’s designer predicted that
sales in the company’s first year of manufacture will total £3
million in leasing business.
With nearly 30 percent of British workers
spending time working at home each month, there is certainly a case
to be made for the productivity benefits of providing an office
space separate from the home environment.
According to the start-up’s managing director,
the product also provides savings on operational and environmental
expenses, and can also mitigate the health and safety risk attached
to home work by passing it over to the supplier.
The asset, which is due to begin production in
early 2010, has been priced at £5,000 (€5,673) per unit.
Furthermore, it is intended for sale exclusively through
maintenance inclusive leasing contracts of three to five years.
Another young company that has
attracted significant media attention through production of an
unusual asset is Accelerated Compost Ltd, a company that went into
business in 2003 with a product called the Rocket® In-Vessel
In the words of Accelerated Compost, the
product “is a solution for small-scale industrial or commercial
applications that produce between 50 litres and 7,000 litres of
food or garden waste”.
The IVC breaks down organic material rapidly
and in large quantities, and is intended to save businesses on
disposal costs, as well as providing a green alternative to
landfill and incineration disposal.
The idea has obviously taken off – the company
has seen between 30 and 40 percent new business growth per annum
since start up, regardless of the slowdown since 2007. And now its
owner, Simon Webb, is keen to start selling through leasing.
Taking his cue from successful captive models,
Webb’s proposed sales strategy is to show potential buyers that a
lease of the product over three to five years could provide
significant savings on monthly disposal costs.
In addition, said Webb, the use of leasing
sales could significantly cut lead time in the sales cycle – his
company has potential clients that have been on the brink of
closing a deal for months or even years.
Currently, the company is in discussions with
leasing providers to negotiate a vendor agreement, with the aim of
marketing to the public sector and large corporates.
While the country’s biggest lenders focus on
tried and tested sectors to tide business over until economic
recovery, now may be the time for shrewd smaller funders to look
for the assets that no one else has thought to finance.