ProWood has now been providing asset finance to the woodworking industry in the UK for more than ten years. There are numerous large finance houses in UK, which compete with ProWood.
See below for some major advantages which make ProWood a highly valued partner in the woodworking industry.
So why is ProWood better equipped to serve woodworking companies?
First of all, about 50% of all contracts with ProWood are never terminated as contracted initially. Customers have to exchange, swap and update machinery in order to follow requirements of design, productivity, quality and product development. Traditional finance houses would apply hefty penalties involved with complicated procedures and the problem of disposing the outdated equipment is not solved at all. In co-operation with Ney Ltd disposable machines find their market again.
Sometimes quick decisions are of the essence. ProWood in co-operation with Ney is enabled to decide more or less on the spot. Traditional finance houses have to go in search of balance sheets and this takes time.
Unforeseen developments or new challenges need to be discussed with people who understand production problems and the real market. Ney and ProWood employs people who possess this expertise and are available for consultations for our customers.
Traditional banking as a source of financing has changed face dramatically in recent years. In the past and still today banks like to secure loans with a “fixed and floating charge” over all the assets of the company.
This results in a deadly dependency on the good will of the bank manager when negative market developments or internal problems show the company in a weakened position. Many executives have experienced the banks' logic to withdraw the umbrella when it is raining and offer it when the sun is shining. The structure of banks doesn’t allow any other approach.
The situation becomes worse when a directors guarantee becomes a condition of any loan arrangement. This is very dangerous and also morally not justified in a world where the personal efficiency of a managing director is only one of the many factors deciding the fate of the company.
Modern financing should be related to the subject to be financed. Long term bank loans should finance buildings. Working capital should be financed through the collateral of outstanding debtors and capital goods should be financed by the prospective viability of the undertaking.
Many executives have experienced the banks' logic to withdraw the umbrella when it is raining and offer it when the sun is shining.
The seller of asset finance should be able to discuss with the company the benefit of the proposed acquisition, “the pay back time” and offer technical and commercially based alternatives. Also he has to view with the company future plans, expansion and foreseeable changes which could reflect back on the investment strategy, in order to keep control of costs.
Types of Financing
Asset financing is mostly grouped into three types
Hire Purchase (also “HP”)
Hire purchase is the most popular method of financing. The advantage is the immediate ownership of the machine. Tax-wise it is depreciable and a valuable asset in the balance sheet.
The disadvantage is the payment of deposit and VAT up front. IF the finance situation allows it is still the most simple and efficient way of purchasing capital goods.
Finance Leasing (also “Leasing”)
With finance leasing the machine remains the property of the financing company. Deposit is still due up front, however VAT payments are only due with the monthly rental payments. Transfer of ownership to the purchaser is possible with involvement of a third party to buy it from. Practically it is a simple admin process without further complications, however, the Inland Revenue tries to tighten up the transfer of ownership but up to now it is a legally acceptable way. The purchased machine cannot be shown as an asset in the balance sheet but the monthly rental costs are deductible from the taxable profit.
Operational Leasing
This is a popular route originated in the car business. The method is similar to “Finance Leasing” but the contract is set up for a period of between 1 – 5 years. The Finance Company retains ownership during this period and the machine is returned after the contract period.
The contract can be prolonged or changed according to the wishes of the customer. The advantages are that there is NO DEPOSIT and VAT is added to the monthly leasing payment – which in themselves are fully tax deductible.
Although the customer does not have the benefit of the residual value, he also does not have the problem of disposing of a used machine, therefore keeping the cost of production under control. A benefit to companies whom like to show low asset value and optimised profits.
We believe this increasingly popular method of finance will gain a much larger market share in the future with the focus on viability and profitability.
The Clients of ProWood Finance
Starter Companies
This is the best justification for the existence of our company. Without the chains and restrictions of government supported schemes we have set up many (hundred or so) starter companies. Not every company succeeded, however there are today a smaller number of millionaire companies, which started from scratch with help of ProWood Finance. We are looking primarily into the ability and determination of the managing owner, his markets and planned products, when deciding to approve finance. Obviously, balance sheets or other historic records are not existent in case of starter companies.
Our specialists will advise about the most prudent and still bold ways to move ahead.
Expanding Companies
The profile of our existing customers proves the point of our successful approach:
1
Our customers are mostly the younger generation
2
Our customers are showing above average profitability
3
The productivity per employee is the highest in the country
4
Our typical customer gives priority to quality, design and marketing.
5
Our customers showing lower stocking levels and still offer very flexible lead times.
Restructuring Companies:
Most companies are managed by partnership between two people-the technical person and the sales person. Such partnerships also include married couples. If the business is successful, often enough the partnership breaks down and a split is unavoidable with financial consequences. In this case we are prepared to support the efforts to continue the company by refinancing equipment and machinery or whatever the individual case requires.
It is very satisfactory to work with our customers on positive ideas and to discuss out the way forward.
