"It ultimately comes down to the funder’s approach to risk and how willing they are to look beyond equipment valuations and to the credibility of the proposal and the business behind it."
- Philip Knight, credit and risk director at Asset Advantage
The majority of commercial finance brokers say they have seen little to no change in the willingness of lenders to fund soft assets, while two-in-ten say conditions have worsened, according to a new survey from Asset Advantage.
68% of commercial finance brokers have seen no significant change in appetite among lenders to fund soft assets such as software, telecoms equipment, office furniture or soft furnishings.
Compared to hard assets, such as machinery, vehicles and heavy equipment, soft assets are considered less secure due to their lower residual value. Despite this, they generally include business critical equipment, yet brokers continue to face difficulties in finding appetite among funders.
One broker said: “Similar appetite to fund soft assets in the market, in fact it has not seemed to have changed much over the last 10 years.”
More than 20% of brokers said conditions have worsened. Replying to the survey, one said: “Funders are becoming more specific on the assets they will fund and this naturally moves the range of assets away from soft. Only a few consider soft assets and their balance sheets have to be robust.”
Philip Knight, credit and risk director at Asset Advantage, commented: “Soft assets can sometimes be challenging for brokers to fund and our latest data shows that it doesn’t seem to be getting any easier. It ultimately comes down to the funder’s approach to risk and how willing they are to look beyond equipment valuations and to the credibility of the proposal and the business behind it.
“Our approach to funding has always been more than just considering an asset’s value and taking a wider view of the business, the lending proposal business case and any additional security that might be offered. We think that this more granular approach to credit enables us to get to soft asset deals that some other lenders might choose to avoid.”
