An asset to manufacturing

Jane Gray talks to Alex Baldock, managing director of Lombard, ahead of his participation in EEF’s National Conference on March 6.

On December 14, 2011 Business Secretary, Vince Cable, announced the formation of a new industry-led task force with the remit of diversifying business finance options. Access to finance is popularly stated as a key barrier to growth for UK manufacturers, suffering as they do at the hands of misconceived finance models aimed at industries with faster ROI, but it is hoped that this task force, and the ongoing efforts of key players in the financial services sector, will soon change this.

The subject of ‘alternative finance’ will be a central theme at EEF’s first annual conference on March 6 where Alex Baldock, managing director of the event’s sponsor, Lombard, is due to present on the topic. ‘Alternative finance’ in the context of Mr Baldock’s presentation will cover a range of finance options  which steer clear of bank debt. These options include asset finance, a speciality for Lombard, but will also touch other options. Mr Baldock explains: “It is indisputable that manufacturers need better access to finance, but expecting bank debt to shoulder the full burden of that is unrealistic. There are more appropriate forms of finance available to suit particular business needs.” Private equity for instance.

Furthermore, for cases where debt is unavoidable Mr Baldock will talk about the possibility of alternatives to simply “slapping on an overdraft.” He comments: “If working capital finance is what you need then you might be best off looking at invoice finance. A vanilla loan will almost certainly not be the best solution for everyone involved.”

Inevitably however, as MD of the UK’s largest asset financier by some distance, it is this form of provision on which Baldock will focus. “Not enough manufacturers are aware of how asset finance works and the benefits it can bring,” says Bladock. “It is a fantastic way of giving manufacturers access to the kit they need to stay competitive – without the risk of hefty investment and with the flexibility to refresh the kit as technology advances.” According to Baldock this does not only apply to key capital equipment, but also to IT and technology products in business infrastructure.

The key selling point of asset finance is that the manufacturer only pays for the kit while it is making money for them and the risk of asset depreciation at end of life is taken out if their hands. Furthermore, Baldock says that manufacturers can typically get far great value from asset finance than they would be able to get from a traditional bank loan. “Asset financiers can get comfortable lending more because they are secured on the asset – and we know our assets well.”

Why is Lombard sponsoring the EEF National Conference?

In 2011 Lombard celebrated its 150^th birthday. An important milestone for the company and a time for it to reflect on its heritage.

Alex Baldock, Lombard managing director recounts: “When Lombard was first established our very first deal was struck with a manufacturer and for some time after that, oiling the wheels of industry was our bread and butter. For a variety of reasons that has not perhaps been the case in more recent years but today we have very real desire to rediscover our roots.”

Putting meaning behind that ambition Mr Baldock speaks of the imperative of increasing manufacturing exports  for economic recovery but says: “the bare facts are not favourable at the moment. Britain invested less in capital expenditure last year than Turkey and Mexico,” two markets UKTI has been working to raise awareness of throughout 2011 due to their rapid growth and potential for UK exports.

As an asset financier Lombard has taken on a crusade to “beat the drum” for capital investment and to show it has an appetite to invest in UK manufacturing – for the ultimate wellbeing of the UK economy as a whole.