Around 68% of commercial finance brokers say that there has been no significant change in willingness of lenders to fund soft assets, a report has said.
According to a survey from Asset Advantage, soft assets, including software, telecoms equipment, office furniture or soft furnishings, are still an area that lenders are cautious about lending on.
Approximately 20% of commercial finance brokers said lending conditions have worsened, with one participant noting that funders were becoming “more specific on the assets they will fund, and this naturally moves the range of assets away from soft”.
“Only a few consider soft assets and their balance sheets have to be robust,” they added.
Asset Advantage explained that compared to hard assets, such as machinery, vehicles and heavy equipment, soft assets were thought to be “less secure” due to having a “lower residual value”.
However, while soft assets cover “business critical equipment”, commercial finance brokers struggle to find appetite amongst lenders.
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Philip Knight, credit and risk director at Asset Advantage, said: “Soft assets can sometimes be challenging for brokers to fund and our latest data shows that it doesn’t seem to be getting any easier. It ultimately comes down to the funder’s approach to risk and how willing they are to look beyond equipment valuations and to the credibility of the proposal and the business behind it.
“Our approach to funding has always been more than just considering an asset’s value and taking a wider view of the business, the lending proposal business case and any additional security that might be offered. We think that this more granular approach to credit enables us to get to soft asset deals that some other lenders might choose to avoid.”
