[April 2011] As the UK emerges from recession, there is a growing requirement for the energy sector to look once again at developing investment programmes that will build sustainable recovery and long-term business success.
Over recent years, some businesses have, understandably, extended their replacement cycles to the point where core equipment is out-of-date, has prohibitively high maintenance costs or is simply making businesses uncompetitive, and ultimately preventing profitable growth.
However, now is the time to reconsider and to replace the capital equipment that will make the difference between a business taking advantage of improving trading conditions, or risk not keeping pace with recovery. The question is now to fund this expenditure?
One of the leading providers of asset finance in the UK, Lombard works with many businesses in the energy industry and is able to share its expertise with its customers. But asset finance is more than simply an accessible way to finance capital equipment. Indeed, it provides significant benefits that ensure that businesses operate more effectively.
Minimises ownership risk.
Asset financiers take the risk on how much value remains in the asset at the end of the contract, and take responsibility for the disposal and management costs associated with ownership.
Releases tied-up cash.
Sale and leaseback frees up the value within the asset. Businesses avoid having to draw on cash reserves that may be needed elsewhere in the business and that can be used to fund growth.
Opens up additional credit lines.
Asset Finance acts as an extra facility that uses the financial value of a business' assets to complement cash resources and existing bank credit lines, such as overdraft facilities.
Delivers funds efficiently.
Prompt turnaround of credit applications reflects security in the assets and high value where asset purchase is urgent. When an asset finance company is finding the best solution, it shouldn't need to look for security – this speeds up the process and enables businesses to acquire business-critical assets when you need them most.
Fixed costs eliminate uncertainty.
As the rental of the asset and the payable interest is fixed for the duration of the contract, it helps businesses plan for the future by eliminating uncertainty and costly surprises.
Defined rental terms, cuts wasted spending.
The rentals reflect usage of an asset for a portion of its reusable life – this is an important value added benefit where customers are expected to use it or part of the asset life.
Speeds up credit decisions.
By operating a standardised credit procedure based exclusively on the assets being funded, customers will experience a prompt credit decision process, removing the need for unnecessary paperwork and repeated requests for additional information.
A company that is already benefiting from asset finance is Aberdeen-based Total Waste Management Alliance Ltd (TWMA). The company is an environmental waste management contractor, providing drill cuttings containment handling and processing services to the global oil and gas industry.
TWMA is a heavily asset-based company driven by customer demand. It needs financial flexibility to rapidly acquire assets as new contracts are awarded. Graham Dickie, TWMA's Finance Director was introduced to Lombard through his bank.
Dickie explains why the business took the asset finance route, "We required funding to build a new TCCRotoMill® system as part of our ongoing manufacturing programme. The technology gives us a complete environmentally sensitive system capable of containing and processing drill cuttings at source while recycling recovered oil back into the drilling fluid. This cost-effective method reduces the amount of drilling waste thereby helping to improve our client's environmental and safety performance.
"The TCCRotoMill® is an integral part of our business and with new contracts coming in fast it was vital for the funding to be delivered quickly to allow us to grow in line with customer requirements. The flexibility of asset finance model puts TWMA in a position to react quickly to customer demand."
With its understanding of the customer and the business, Lombard was able to help create a bespoke £800k finance solution to support TWMA's domestic and international growth plans. Graham Rettie, Lombard's Relationship Manager explains, "The pioneering TCCRotoMill® system puts TWMA years ahead of its competition and our finance model is well suited to a company that needs to react quickly to growing demand."
Lombard's funding has enabled TWMA to build technology that will support its growing business and its position as a market leader. TWMA is the only company in the world able to offer a fully integrated waste management solution.
There is no doubt that asset finance is well placed to support the requirements of UK energy companies such as TWMA and to respond to a changing environment. Asset finance has a key role in the recovery process, highlighting the significance of access to a flexible approach to funding. Asset finance is ready and willing to talk to energy businesses large and small, to encourage increased capital expenditure and, in so doing, encourage profitable growth within the sector.
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For further information please contact:
Karyn Theron
PR & Communications Manager, Lombard
+44 771 780 7092
karyn.theron@lombard.co.uk
Notes to Editors
Lombard is part of The Royal Bank of Scotland Group. As one of the largest asset financiers in the UK and voted best by Business Moneyfacts in 2009, 2010 and 2011, Lombard provides various forms of asset finance to businesses of varying sizes – from SMEs to large corporates. Products include Hire Purchase, Finance Lease, Operating Lease, Sale and Leaseback, Contract Hire, to Contract Purchase, as well as multi-specialist asset finance products such as marine, aviation and specific wholesale and stocking funding for distributors and dealerships.
Celebrating its 150th anniversary in 2011, Lombard is headquartered in Redhill, Surrey, with an extensive network of business centres situated throughout the UK, and is an appointed representative of The Royal Bank of Scotland plc, which is authorised and regulated by the Financial Services Authority.
