Kieran Marshall, head of AIB Finance & Leasing
The recovery in Ireland’s economy has meant businesses are investing in new equipment and vehicles again, and this in turn has led to an increase in leasing and asset finance
“Almost 30% of credit applications relate to asset finance and invoice finance. Both are excellent products for small and medium sized businesses in that typically the assets act as security for the loan facility”
T he sharp economic downturn in Ireland and across Europe from 2008 onwards negatively impacted demand for new equipment and vehicles. Businesses either chose or were not in a position to invest in new or replacement equipment.
Things are changing however, as the equipment leasing market has stabilised and shown moderate to strong growth over the past three years, according to Kieran Marshall, head of AIB Finance & Leasing - which has grown new lending by 107% in this period.
“Almost 30% of credit applications relate to asset finance and invoice finance. Both are excellent products for small and medium sized businesses in that typically the assets act as security for the loan facility,” he says.
The asset finance market encompasses all sectors including agriculture, construction, manufacturing, healthcare and ICT.
“In the agri sector, a good barometer of equipment sales is new tractor registrations. These have grown from 1,500 in 2011 to 1,900 in each of the subsequent years,” says Marshall.
“We have experienced strong growth and demand for credit to assist in the purchase of agri equipment. Despite agriculture being a cyclical business that is experiencing price volatility, it is resilient, has performed well and the outlook is positive in the medium to long term.”
Looking at other sectors, Marshall expects the growth in demand for new/ used plant and equipment to continue. “While construction activities have increased strongly over the last 18 months it would appear that it is still some way off peaking,” he says.
The Construction Industry Federation has been explicit in highlighting the deficit in housing and infrastructure as the economy continues to recover. Indeed it points out that the construction sector is currently half the size required for a developed economy.
The growth to date has been driven by both public- and private-led projects across a wide range of construction assets. The Government’s €27bn capital investment plan over the next six years will greatly assist development of this sector.
“The demand has come directly from large construction companies, through smaller sub-contractors and plant hire operators. As the industry continues to grow, it will drive demand for machinery finance and AIB Finance & Leasing is well placed to support this growth,” says Marshall.
The finance providers in the market are a mixture of captives, independents and bank-owned finance companies. As the economy has recovered new entrants targeting niche segments of the market have become a feature. Subsided finance packages are also being used by manufacturers and distributors to try to attract customers’ attention.
According to the Ipsos MRBI Financial Services Survey 2016, AIB Finance & Leasing is the market leader in SME asset finance. It has numerous wholesale and retail partnerships including subsidy schemes across the new equipment/machinery landscape.
“AIB Finance & Leasing has invested heavily in technology and product development to ensure we continue to meet the evolving needs of our customers, suppliers/distributors and the market in general,” says Marshall.
“We have the largest team of mobile asset finance specialists geographically spread throughout the country backed up by a strong service-orientated central support team.
“Investment in technology is enabling more efficient end-to-end processing of our new business and will enhance the service proposition to our customers, suppliers and distributors.”
A critical success factor for the growth of the equipment leasing market is the availability of credit to all stakeholders. AIB Finance & Leasing has continued to provide availability of credit through its umbrella Backing Brave campaign targeted at businesses throughout the country.
Its offering comprises of competitive fixed and variable rate options to assist appropriate cashflow management, typically up to five-year terms where the useful life of the asset supports same, and 100% finance.
“We support and engage with the leadership of the industry to further develop and educate the market, for example, the Farm Tractor & Machinery Trade Association, Society of Irish Motor Industry, Irish Road Hauliers Association and Irish Hotel Federation,” says Marshall.
In terms of delivering added value to customers, AIB Finance & Leasing can offer My Business Toolkit. Introduced by AIB in partnership with BCSG, this is a secure set of business apps carefully selected to help with business planning, invoicing, data security, web hosting and finances (See www. mybusinesstoolkit.ie).
Customers can make asset finance applications through AIB branches, business centres; telephone banking, through its mobile sales teams or the asset supplier.