June 2002 saw Norton Folgate Plc (NF), the small-ticket brokerage, embark upon its first sales-aid joint venture (JV), Wellpoint Financial Services (WFS), providing funding for medical equipment to pharmacies. NF managing director Robert Keep said: “this initiative has proved to be a good learning curve for the company and has provided the opportunity to test our administration systems on that type of product”.

Keep confirmed that diversification is key in the current challenging times. He said: “our search for different income-generation opportunities is driven by difficult market conditions. We do not expect to see much growth in 2003 in terms of funded balances and income generation, apart from that from Wellpoint.” Of particular interest to NF going forward are more formal relationships as a badged lessor of companies selling a range of equipment.

He confirmed that the company is evaluating several other sales-aid programmes to dealers in, for example, vehicles and heavy equipment, each worth in the order of £1m. NF is currently testing the viability with large commercial vehicle (CV) suppliers. The company is also assessing facilities management opportunities where there is a dealer connection. Keep is concerned about recent developments in the sales-aid market. He explained: “there is a tremendous lack of a level playing field, with three or four large brokers being allowed to dominate and stifle competition. A particular concern is where large brokers, unlike smaller ones, stand in the invoice chain thereby resulting in suppliers being unchecked.”

Adding: “we only discovered this when becoming involved in Wellpoint where just one funder came to the table. Had one of the large brokers received the account, that broker could have dealt with any finance company. The entry of another main sales-aid player,” he stressed, “would help to make the market more competitive and life easier for smaller brokers.” Without change, he does not believe it is beyond the realms of possibility that the market could end up comprising only large brokers and one-man businesses.

NF placed £18m new business in the 12 months to end July 2003 plus more than £2m from WFS and generated £1m in fee income. Its aspirations to write more own-book business have been largely abandoned in favour of seeking a JV with a finance company. Keep said: “financing our own book was too much of a challenge, particularly in terms of finding continued funding”.

NF now considers its funder future to be as a JV with a leasing company which enables NF to sell £5m a year at a lessor net return of 18%, with NF bringing the business to the table and the funder bringing the back office and money.

NF has also teamed up with a web site provider that is producing finance enquiries for cars. This is generating about 20 hits a day. If the current experimental phase is regarded as worth pursuing, another one will be set up for CVs. Keep said: “if all goes according to plan, cars and CVs could generate £2.5 to £3m of funded balances annually”.

Reproduced with the kind permission of Leasing Life
 
Leasing Life Issue: 121 - October 03
by Margaret Waldren ,
Published for the web: May 23 04 12:25
Last Updated: May 14 09 10:25
www.leasinglife.co.uk