Finance For Stock & Assets Purchased Overseas
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Finance For Stock & Assets Purchased Overseas
Raising finance against an asset can be difficult if you're buying from overseas. Most lenders won't entertain the idea - but we can help.
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Asset finance is a type of loan where the lender offers credit against the value of the asset itself. It allows businesses to spread the cost of a purchase over the term length of the loan rather than having to pay all of the capital in one go. When the cost of large assets like plant machinery can soar, asset finance offers a route to ownership that doesn’t hamstring your capital.
In specialist sectors, businesses may find that certain assets are either only available overseas, or cheaper when compared to buying in the UK. In these situations, you may consider turning to your typical asset finance lender, only to find they will not support you.
When buying assets overseas, businesses have traditionally struggled to attract lender support for finance. Mainstream lenders like high street banks won’t provide loans against overseas assets due to a number of factors, including:
- Challenges caused by overseas shipping and supply routes, including import taxes and charges.
- Local laws may impact the buying process.
- Foreign currency payment requests.
- Complex terms on financing the asset from overseas sellers.
- Quality concerns.
Britain’s recent exit from the European Union has made the import and export of equipment even more difficult, giving lenders yet more pause when making asset finance decisions. Here at Rangewell, we’ve managed to find lenders willing to support overseas purchases – but only if they meet certain standards. Read on to find out how to finance assets from overseas.
Why buy assets overseas?
In most cases, acquiring an overseas asset is a case of affordability – businesses may spot a cheaper asset in a foreign market and decide to act on the opportunity. However, the timing of such an acquisition is delicate as the fluctuations in market conditions means what you perceived as a good price could become untenable for a lender if currency markets change swiftly during the acquisition process.
Assets, fortunately, have an intrinsic value that usually informs the lender’s offer. They can lend to you with the foresight that the asset can be sold in the event of a default. In an overseas asset acquisition, this is less guaranteed as the assets final value will depend on the currency it was purchased in and the condition it reaches the UK in.
Before pursuing any overseas asset acquisition, read our tips below to build out your understanding of what’s involved and why lenders may not be willing to finance you.
What to consider when buying assets overseas
As a buyer, the things that concern mainstream lenders are worth thinking about ahead of your purchase. Whilst the team here at Rangewell can help you find lenders that will offer asset finance for overseas purchases, you should still have a good understanding of the strengths and weaknesses of the process before you apply…
Currency exposure risk
The most relevant problem to lenders and buyers when acquiring overseas assets is that of currency risk. Exchange rates are in constant fluctuation, which in turn affects the value of your proposed asset purchase. Sales can take as long as six months to go through, which is a long window for currency changes.
If you’re purchasing the entire asset for 100% cost on delivery, this isn’t a worry – but that is exceptionally rare. In most cases, you’ll be paying a portion of the cost upfront. If rates then change, the remaining percentage will have essentially cost you more to buy than originally offered even though the seller’s price and percentages remain the same.
Even outside of fluctuating rates, businesses need to be aware of the potential risks associated with large currency transfers overseas, where some banks or providers may charge fees that can increase the cost by a surprising amount and limit any potential saving you’d first identified when looking at the asset.
Consider how rates may impact your purchase well in advance of the event and create a way to mitigate the issue, such as a forward contract that enables you to lock in a fixed price for a set period of time. This would also help secure finance as you could show the contract to the lender to help strengthen your application.
Quality standards and documentation
Different countries set different quality standards on machinery and equipment. The UK has a fairly strict system with ISO approvals and other regulatory bodies, but some territories are less advanced and, therefore may offer equipment that would fail to live up to UK standards. Regardless of whether that is true or not, lenders may perceive it that way and subsequently hesitate to lend against the asset.
To mitigate this, ensure you’re dealing with legitimate businesses and can procure the relevant documentation to prove quality standards and authenticity. It’s also a good idea to find out what kind of manuals are available for your potential asset – if user guides aren’t available in English, is the complexity associated with skilling up your team worth it?
Parts, servicing and repairs
In most cases, general business assets are fairly compliant to global standards and can be maintained in any region. In some more niche sectors, however, you may find that certain machines or equipment come with heavy restrictions around the availability of spare parts or maintenance solutions.
Some overseas sellers may not offer any repair or maintenance guarantees to UK buyers and this should be identified early in the sales process, so you can then find an alternative provider willing to support your new asset.
Even on a far smaller scale, with less complex equipment, such as acquiring a slew of cut-price computers from a business selling off stock abroad, you still need to be aware of the added complexities of part incompatibilities like keyboard layouts, plug configurations and more. Some machines won’t work at all with UK power sources, meaning you’ll have to buy adaptors or install new electrical elements.
These replacements and spare parts cost money and time. The value of the asset demands you have a plan in place ahead of time to acquire the necessary adaptors/spares/replacements. You can’t just progress the sale and expect to ‘fix’ issues later – you need to show lenders you’ve accounted for these unique challenges and have accurate costings in place for overcoming them.
Supply chain delay and imports
When buying anything from overseas, you’ll need to account for shipping costs and timelines as well as the added delays associated with the sale of a valuable asset and, in most cases, the practicalities of shipping a large piece of equipment. Since Britain’s departure from the EU, imports have become more challenging and you’ll need to speak to someone well versed in the process before deciding if it’s right for you. In addition, imports may be subject to tax, which we discuss in the next point.
Tax and legality
Every country has their own laws with regard to property and business purchases. When UK businesses acquire assets abroad, you’ll have to deal with the UK’s own strict legal requirements as well as those in the seller’s country.
For example, the EU and the UK signed a zero-tariff agreement to prevent paying costly tariffs when importing heavy machinery to the UK. However, to access said tariff, you’ll need to have a statement of origin or another form of proof of the origin of the machinery. In many cases, the seller will have to provide this to you or you’ll face added costs.
Capital gains allowances may not be claimable on overseas imports, though you’ll need support from a tax professional to determine if that’s the case for your business.
Some specialist assets demand a comprehensive after-sales support network in order to operate profitably. If you’re buying an asset overseas and importing it to the UK, you need to ensure you’ll be able to access any essential support without incurring extra charges or complexities. If it’s an asset that needs a live support line, timezone restrictions may mean your team can’t get the help they need when they need it. This, in turn, devalues the investment and often makes it not worth pursuing unless you can find a UK-based support offering.
Asset finance and expansion into overseas markets
Not all assets purchased overseas are shipped back to the UK. Some businesses spot opportunities for expansion when large assets are sold off in an overseas market, allowing the company to purchase them and operate them in the seller’s country as a new business venture.
This only generally occurs with large, expensive assets, such as plant machinery. If bought and operated in the seller’s country, you’re essentially giving your business a route into a new market and accessing a ready-made springboard for growth. However, you need to find a lender who is not only willing to lend against the asset itself but also provide further credit to use to fund your expansion.
In most cases, you’ll need to raise both asset finance for the equipment and general business finance against your existing business, which is offered based on financial performance and potential securities you can offer, such as taking a loan against any physical premises your business owns.
If you’re considering buying machinery overseas to expand your business there, you’ll need the support of a team like ours here at Rangewell. We’ll help you identify lenders that can assist you, build your application and negotiate on your behalf – all at no cost to you.
Get finance for asset purchases overseas and in the UK
Now that you’ve gathered an understanding of what to consider before purchasing assets overseas, you can see why lenders may hesitate to offer any sort of asset-backed lending. If you’ve spotted an opportunity that is good valuable to miss out on, you need a team that can help you negotiate the right deal to finance the purchase without impairing your growth trajectory or capital.
Rangewell can help you in two ways, whether that’s working with lenders who ARE willing to lend against overseas assets provided certain conditions can be met, or sourcing alternative forms of finance you can use to purchase the asset. In the latter instance, our team can help you get the best deal possible without having to risk too much in the form of securities.
We’ll help guide you through the complexities of asset finance for overseas purchases and help you make the right decision for your business. Contact us today to get started.
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