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New lease of life for asset financing


News - 25 April 2018

Asset finance is evolving, providing creative and flexible ways to fund growth and manage risk. With IFRS 16, what, how and why our clients use leases as part of that plan is shifting, too. Simon Lefevre explains how ABN AMRO Lease UK can work with brokers to craft the right strategies.

It’s been a great start to the year at ABN AMRO Lease UK following the successful legal merger with our colleagues in Commercial Finance. Quarter one has seen the Lease team grow further in size and expertise enabling our support to businesses to grow and increasing our portfolio by 20% against this time last year. We’re also really proud to have an award win under our belt too.

We are far from complacent though – the industry is constantly evolving and we must continue to evolve with it. Asset finance is often a simple business. Brokers and customers come to us with a financing request either involving new asset purchases or refinancing. We structure a suitable facility for them, taking into account the asset, residual value, market conditions etc. and then close the deal. The process can be sometimes more reactive rather than proactive. It tends to be quite conservative – vehicles, equipment, plant and machinery are quite predictable but all that might be about to change. After nearly 10 years of discussions the international accounting standard setter (IASB) published IFRS 16 leases in January 2016 with the new standard requiring companies to bring all significant leases on-balance sheet from 1 January 2019. This is going to impact some of our leasing clients.

Of course, this is not new – a key long-standing objective of the IASB has been to bring leases on-balance sheet for lessees. All companies that lease major assets for use in their business will likely see an increase in reported assets and liabilities, particularly those who are users of operating leases. This will affect a wide variety of sectors and the key change will be the increase in transparency and comparability, as companies will need to gather additional data about their leases, in order to report in the correct way from 2019.

But any major, across-the-board change to the balance sheet is a great opportunity to reassess assets, capital efficiency and finance structures. We’re currently investigating how customers are going to change their behaviours.

Whilst it’s important to sound out individual businesses to understand their sensitivities and for prospective changes to behaviour, we’re also committed to gathering information in aggregate – and that’s where we need your help so as to tailor solutions in the new environment.

Accounting changes, IFRS 16, the general digitalisation of the balance sheet represent significant challenges, they’re also a fantastic opportunity to offer businesses a new approach to asset financing from a reliable funding partner. Our message to brokers – and to businesses – is “we are in it for the long term!”