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The asset finance life cycle

*Please note though that this is not intended to be an exhaustive list of the issues to be considered nor is it meant to constitute any form of advice to you. As far as we are able, we exclude all liability for any reliance you or any other party may place on the information and you should seek any specific advice that you feel is necessary to help you make an informed decision.*

Your customer Agreements

Your customers will require standard form finance agreements. You can either buy these agreements off the shelf, you could work with a solicitor who may have an agreement suite they can sell you or you could develop your own agreement suite with legal advice. Depending on product type, your asset finance agreement should highlight whether you want to collect and pass on maintenance costs, charge for excess usage costs (for example incur a fee for extra mileage) and any other return conditions that the customer needs to comply with.

These requirements may also need to be captured on your system (this could drive costs up slightly too)!

Pay outs

Of course, if you want to become a funder you need to have surplus cash resource to pay suppliers outright and then collect the rentals over a period of time. You need to consider how quickly you’ll end up utilising your cash resources.

You may also need to let your bank know that your business model has changed and that significant sums of money will be going in and out of your account to avoid your account being blocked for suspicious activity.

In life support

Another thing you’ll need to consider when you become a funder is in life support. Your customer may call in to change their address, submit a request for a reschedule and novation, ask for a settlement figure or even make a complaint.

As your book grows you may want to consider implementing a phone system to help handle high call volumes. As your business evolves, you’ll also have to reflect on whether you can handle all the administrative duties yourself or whether you’ll need employ someone or people to lighten workloads.

Unfortunately, complaints do happen, so it would be a good time to review your complaints policy and the procedure for handling them including which customers are eligible to complain to the Financial Ombudsman Service (FOS). It would be ideal, and a requirement if regulated by the Financial Conduct Authority to have your complaints policy displayed on your website.

Collections, repossession and disposal

Recovering assets is something that you’ll likely have to do, but hopefully not that frequently. It’s advisable to think about the steps you want to take for customers default as you’ll instantly know what to do if the situation arises – considered decisions are often better decisions.

When thinking about your process, in the initial stages you may want to get in contact with the Customer to identify if it’s a blip, a problem or a real default. If the default is real and customer is in financial difficulty, you’ll probably want to work out a fair plan and get them back to paying on time. If it turns out the asset is no longer suitable for the customer, you’ll need to think about terminating the contract and taking your assets back. Your policy should talk about who will conduct the repossession, where the goods will be held and how they will be sold.