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Why fair and firm pricing matters more than ever.

by Eamonn McMahon

In a previous post from early 2022, The end of ‘easy’ money, I predicted the emergence of strong inflation and high interest rates. Fast forward 18 months and we are all starting to feel some serious altitude sickness. And no sign of respite yet – markets expect the Bank of England to touch 7% over the coming year. A rising tide lifts all boats – so everything from overdraft rates, to commercial mortgage rates to asset finance is set to weigh down on business growth.

Within asset finance it is worth considering the effect of these higher rates. An investment in £100k of equipment, financed via monthly HP ( over 60 months with a 10% deposit) now costs 12% more over it life vs early last year. That will rise to 15% more. And that’s on the back of two years of rising equipment prices. Pass me the Rennie.

For a small business that is say weighing up investment in automation equipment or additional transport equipment, this is material. For many companies with a tight operating margin, what was for a long time a steady green light is now flashing amber. Funding an equipment investment with asset finance, now, more than ever, requires careful consideration of the terms on offer.

There is little we can do about the higher rates – the cognitive dissonance that accompanied £900 billon of quantitative easing from the Bank of England and pandemic largesse from Whitehall rests on those who are far above our pay grade – however, we can ensure that our Vendor and Customer base can at least rest on fair and firm pricing over the next few years.

What exactly do I mean by fair and firm pricing?

Here at equipal fair pricing means three things:

  1. Always showing the true cost of the finance. We only quote an APR % which is the true cost of interest as it takes account of when the Customer makes payments on your HP. Where funders quote a fixed annual % rate (colloquially, a ‘flat rate’) that interest rate is misleading – it assumes you don’t make any payments over the life of the deal. It also fails to consider the cost of extra fees.
  2. We provide a fair discount on future interest calculation if you wish to settle early. Why should you as a Customer pay almost the entire interest cost if say you settle two years into a five year agreement?
  3. And we don’t charge unnecessary, nonsense fees. We have all seen how the asset finance industry likes to juice up it’s profits with a healthy serving of fees for this and fees for that. Just last week, we saw one of our competitors, who heavily market their tech capability, quote a customer a £200 documentation fee. It added 1.5% to their quote. So it is digital and automated.. (i.e. 0 marginal cost for you) but you need to charge a Documentation Fee? ‘Mangetout Rodney..’

Along with fair pricing, we always emphasise that our pricing is firm (usually for 14 days, sometimes for 30 days). This means that we commit to the pricing we initially quote on enquiry so you have certainty when agreeing the finer details with your equipment vendor. In commercial finance, flip-flops hurt and you won’t find any at equipal.

With rates from 7.5% to 15% APR, we are often the most competitive of funders when quoting in competition. Not always but generally, yes. And with equipal, you know you will get what it says on the tin – fair, firm, competitive finance. Delivered with⚡speed.