What is Close Brothers Asset Finance’s view of the crane market?
We continue to have a strong appetite in the crane market to fund everything from large mobile cranes through to smaller pick and carry cranes, and spider cranes.
We have also approved larger facilities for tower cranes and will look at funding gantry cranes.
How has the pandemic affected the market?
We’ve not noticed an increase in uptake in our marketplace, but a crane is typically a very well-maintained piece of equipment that has to meet stringent health & safety testing on a regular basis, which helps protect their residual value.
In addition, the supply chain tends to be longer than with other standard yellow metal assets, helping residual values remain strong because the assets are in demand.
The construction sector hasn’t been as impacted by COVID when compared to many others, having been able to trade through the pandemic. It has also been well supported by CBILS (Coronavirus Business Interruption Loan Scheme), which has helped keep investment plans on track for many.
Which are the most popular finance products?
Typically, Hire Purchase is used for small to medium-sized cranes and are purchased by SMEs; large cranes tend to be financed through manufacturer-supported schemes, and in the case of large tower cranes, CAPEX or bank funded.
These pieces of equipment have a long service life and attract longer finance agreements.
What is the awareness of asset finance in the crane industry like?
Multimillion turnover construction companies would typically make their larger equipment investments using their annual CAPEX budgets; however, they may be surprised to learn how much equity is held in their unencumbered fleet and could be drawn upon using our Sale and HP Back process, especially if they needed some short-term funding or cash flow injection.
The CBILS facility may also still be available, subject to eligibility.
In a period of economic downturn, a lot of cranes end up in the secondary market. In what ways does that affect business?
As with any asset type, a downturn in the market results in a glut of unwanted assets hitting the market at the same time, which is always a risk to residual values.
Smaller mobile cranes often have a worldwide audience via Euroauctions and Ritchie Brothers auctions and can quite easily achieve good residual values.
Larger tower cranes often have a short to medium term contracts to service, which can normally be purchased in situ along with the crane itself. This creates an attractive proposition for any potential buyer in the crane hire market.
What are some challenges associated with providing crane finance?
- The operator adhering to the strict H&S legislations and properly inspect, operate, and maintain the equipment
- Major infrastructure and construction projects to support the large mobile and tower crane hire markets