Quartz Finance, Norton Folgate and Oak Leasing are just a few brokers with expanding interests, so is diversification the way forward for the UK’s brokers? Fred Crawley reports
Much of the optimism to emerge from the broker world this year has come from those companies which, finding traditional business models under pressure, have identified what it is they do best, and have then replicated it in a fresh market.
The traditional practice of holding on to a dependable business source and then calling round to find the cheapest funding available has died out, and those brokers that will survive are those who are prepared to look at new types of business.
One company, Quartz Finance, has its roots in financing IT and telecommunications assets, but is now branching out into providing for the corporate aircraft and leisure marine markets, where it will introduce deals between €250,000 and €50 million in size.
This news comes in the wake of a similar announcement by broker Norton Folgate, which revealed in the third quarter that it would be looking to move into the world of yachts and jets.
Looking into the recreational sector
One would think that aviation and marine business could not be more different from arranging finance in the low-value, high-volume world of technology assets. However, Ian Jackson, who has just been brought on board to spearhead the operation at Quartz Finance, begs to differ.
“Many manufacturers and brokers will only discuss finance with clients if asked, but I think they are missing out on a more strategic approach,” he said.
“If we can apply the MO [modus operandi] we have developed in the IT market – where integrated financing is a much more common sales strategy – we can do a lot more to support the marine and aviation industries.”
Jackson uses the example of vendor finance, which is rare in recreational vessel or private aviation sales.
“Because sales volumes are much lower, a few cancelled orders can have a disproportional impact,” he said. “Introduce a provider to vendor finance, however, and you add an important layer of transaction stability.”
Quartz has also broken the cultural barrier that seems to prevent UK introducers looking to Europe for clients and funders. Nearly 40 percent of its business is now placed in Europe, and Quartz has relationships with around 40 funders globally – a contact book that will come in handy in the highly international jet industry.
UK broker Oak Leasing has also reported growing success in placing business in Europe, while Esher-based Lease UK is known to have entered the continental market this year. All three firms have reported that Northern Europe – in particular the Benelux and Scandinavian regions – are particularly ripe for exploration from the UK.
But an entrepreneur looking to find a niche in lease brokering need not launch into exotic locations and markets to find good returns. There are still opportunities here in Britain.
Profiled in Leasing Life’s sister publication Motor Finance this month is Mel Goodliffe, who recently bought his Flexxilease brand from former owner the Car Crash Line Group (CCL), and has set it up as a short-term, online-based lease broker for consumer and fleet business.
Since splitting from its lease book at CCL, Flexxilease has actually increased its business volume, and has prompted a sister brand, Flexxivan, to address the CV sector in much the same way. Goodliffe has taken what his brand did well as a channel for a funder, and made it the cornerstone of a new introducer. Business volumes, he says, have actually risen since making the move.
Expanding into the wider world of commercial finance is another possible course for brokers to follow. Take as illustration Close Commercial Finance, the new Close Brothers brand that will incorporate both asset finance and cashflow finance lending, and which is known to be keen for its lease brokers to introduce ID and factoring business.
But although Close and many other lenders are bringing leasing closer to their other commercial finance offerings (see Leasing Life, December 2009), to expand from leasing into this wider field of “asset-based lending” (ABL) is still quite a leap of faith.
Evette Orams is the managing director of Hilton-Baird, a specialist ID and factoring brokerage that includes asset finance among the broad repertoire of products it sources for customers. Whereas she agrees that a broker which can arrange both cashflow and lease finance can offer something greater than the sum of its parts, she warns that the ABL funding market requires experience to navigate successfully.
“The market for ABL is forever changing, as are the appetites of lenders. We have had experience of providing volume to this market for 13 years, and so we know who will provide what, and when. In such a time-critical business, a fresh approach to the funding environment could be quite daunting.”