The Evolution of the UK Broker Asset Finance Market

Asset finance new business levels will continue to track capital investment spending in the economy, although there appears to be a longer term ceiling in the penetration level at around 35% of total investment.

In a recent podcast, Jochen Jemlich, CEO of Europe’s largest lessor, Société Générale Equipment Finance, commented that there could be a golden age coming for asset finance as governments implement net zero carbon policies. Massive investment in replacing vehicle fleets, transportation assets and commercial equipment will be required as whole economies become powered by clean electricity, hydrogen and other green sources. The UK’s target to achieve net zero carbon by 2050 is one of the more ambitious in the developed world.

There will be plenty of competition from capital markets, bank debt and project finance to fund this investment, but the opportunities for asset finance will certainly be there. What share will the broker channel win? The answer will be dictated by two key factors. Firstly, the ongoing appetite of the funding community to accept broker deals, and there is no evidence to suggest that this will diminish. Secondly, the ability of the sector to attract new talent, to drive an increase in the number and scale of brokerage businesses, and to build the next generation of experienced senior brokers in the longer term.

LTi Technology Solutions, a leading provider of software solutions for the asset finance market, has recognised the importance and the continued growth potential of the broker channel. A new “end to end” servicing platform has been developed by LTi as a comprehensive and cost effective solution for small and start up brokerage businesses. Called Aspire Express, this platform is now available in the UK.

LTi has a 34 year track record in servicing the US asset finance market, having developed the world’s first Windows based application for equipment finance in 1992.

LTi provide software solutions to nearly 300 clients, the majority of whom have been with them for more than 11 years. Customers include large multi-line funders, independent, captive and hybrid funders and small brokerages. Nearly 9,000 active Users service combined portfolios of nearly £135Bn, a figure that exceeds the entire UK asset finance market.

A more recent trend that has emerged in the broker channel is the acceleration of activity by brokerages building their own book portfolios. This has largely been driven by the increased availability of block discounting and wholesale debt funding. Funders with a long track record in providing debt capital to brokerages have been increasing the size of the facilities they offer, especially to their larger borrowers. At the same time, the dynamics of this market have changed with an influx of funders who are new entrants in this space. This additional funding capacity has resulted in more and larger hybrid funders being created within the broker community.

To take advantage of the new opportunities to start their own book portfolios, small and start up brokerages will need to invest for the first time in a software platform to process their deals. The increased supply of debt capital will also allow brokerages who are already writing own book deals to ramp up their business volumes. This may require an upgrade or replacement of their current IT platform.

LTi, a US-based provider of IT products and services to the asset finance sector, has launched an entry level version of its market leading ASPIRE software platform that is designed for brokerages who want to start or grow their own book portfolio. ASPIRE Express, a cost effective software platform, now available in the UK.

There are certain items that should be addressed with IT services provider to determine their solution is the right fit. Being in the asset finance industry, rather than servicing a wider range of market sectors with different products is key to a successful partnership.

Having an IT services provider who operates in several unrelated markets with differing software solutions is less likely to have the industry experience within the equipment finance market that is needed to deliver the best long term solution. Asset finance may not even be seen as a core business by technology providers whose business is not exclusively asset finance and lending.

LTi’s core focus is on the asset finance, loan and leasing sectors since its foundation 34 years ago, working with brokers, bank owned, independent and captive funders. LTi has always been laser-focused on the asset finance and lending area.

Having a platform designed for the asset finance industry, and by people who have leveraged their industry knowledge in its creation is a critical distinction for choosing the best platform.

LTi Technology Solutions was created by Russ Hallberg and Randy Haug who both have significant experience in the asset finance marketplace. Their philosophy from day 1 was to develop solutions that went beyond the technology and software to include indepth asset finance industry knowledge in order to become a true client partner, and not just a service provider. LTi’s team today includes industry professionals who have a deep understanding of the operational challenges facing their equipment finance clients.

Next is determining how good the platform is and if it is a complete solution that can process every type of asset finance deal, throughout the full lifecycle of the contracts.

LTi’s ASPIRE Express platform is very good (its industry leading in the US) and it’s a complete end to end solution. Any type of own book or brokerage deal can be handled, from any market channel – direct, vendor, captive, broker, for consumer or corporate customers. Subsidies, blind discounts, VAT deferrals, seasonal payments, the intricacies of British Business Bank products and the many other non – standard deal variations that can arise are all accommodated by ASPIRE Express. Mid-term and end of term contract management functions are all included on ASPIRE’s single SQL server data base.

Consider if the platform offers funding modules that provide the reports required by external funders who provide financing to support own book activity.

The growing number of funders who are now financing own book deals for brokers and the increased level of facilities being provided are driving the demand for borrowers to provide more comprehensive and frequent reporting to their funding partners. Many funders today also have heightened concern about risk profile and fraud prevention in relation to the underlying business they are funding.

LTi has already met this industry need in the US for clients who need to deliver reporting on block discounting, receivables, wholesale debt and syndication facilities. Bank funding modules have been developed for the ASPIRE Express platform, and these are available for UK clients.

With a platform like ASPIRE Express, a minimal level of IT knowledge and experience is required for day to day operations. Users require no specialist IT knowledge. For every installation, LTi creates a training agenda to optimise the user experience for client staff. Post installation support is provided by LTi support desk backed up by 24/7 access to comprehensive web based Help functionality.

Another key consideration is, how the platform is upgraded. With ASPIRE Express there is no limit to the number of contracts that can be processed. It is a scalable platform that can easily accommodate unlimited future growth without triggering a change of platform. If the client needs to add new modules to the Express platform to provide additional functionality as the business grows, these can simply be plugged in. This modularity allows the client to upgrade to the ASPIRE Small Business or Enterprise edition when required, without having to install a new platform.

Data security is always a concern. ASPIRE Express clients have exactly the same level of data security that is provided to LTi’s largest regulated bank clients who are using their ASPIRE Enterprise solution. It is an entry level solution that provides top level data security.

LTi Technology Solutions is a customer obsessed, global, full life-cycle lease and loan management solution with over 34 years in the asset based, equipment finance industry, 8,900+ named platform users and currently supporting over 180B of assets under management.