Introducing CapEx Term Loan
In this article, Faye Cooper, senior marketing executive for SME markets interviews Ed Rixon, senior manager for Growth in DSME Lending to explore the funding needs that Shawbrook’s new CapEx Term Loan fulfils, and why it could be a beneficial alternative to traditional Term Loans or Asset Finance.
At a glance
Faye: Could you give an overview of what a CapEx Term Loan is?
Ed: The unsecured CapEx Term Loan is a product designed to help SMEs fund capital expenditure projects to achieve their growth ambitions. It’s an alternative to a standard unsecured business loan, or in instances where an asset finance facility may not be suitable. It’s designed to support SMEs investing in the growth of their business through capital expenditure in tangible assets, or for intangible expenditure such as IT equipment, software licenses or office refurbishments. Whether it’s the refurbishment or fit-out of a new office, acquiring business-critical soft assets such as IT equipment or technology licencing, our CapEx Term Loan enables your clients to spread the cost across a range of payment terms.
Faye: What makes it different from traditional asset finance or a standard term loan?
Ed: When compared to a standard term loan, the CapEx Term Loan is for a capital expenditure use case only. Because we’re funding a growth-orientated initiative, it enables Shawbrook to price the loan very competitively when compared to other unsecured loan products in the market.
The unsecured loan is flexible; we are not using the asset as security so there are fewer limitations on the type of assets that can be funded. The CapEx Term Loan will also have a quicker time-to-cash compared to an asset finance product because we’re not required to do an asset inspection or review the vendor.
Faye: That sounds like a useful product. What are some of the circumstances that CapEx Term Loan may be the right choice?
Ed: The CapEx Term Loan may be used to fund any soft asset purchases, especially as the loan-to-value in a traditional asset finance structure is likely to be prohibitive. Where businesses are looking to expand an existing site or open a new office, it can be great to support fit-out and refurbishment costs. It’s also a useful product to support intangible costs, so for things like technology costs where an investment in technology or software to enhance business operations is being made.
In reality, there are a vast amount of use cases as we’re looking to support growth-focused businesses investing in capital expenditure projects, so reaching out to your BDM to discuss how the product can be used, and to explore their clients’ projects is going to be worthwhile to see if this could be right for them. We’re also capable of using our digital-decisioning tool to provide automated agreements in principle to help speed up this process. We can give a decision within 24 hours, but it can happen far quicker than this, often within the same business day. The simplification in the backend means that in many cases we can payout the same day that the customer returns the signed documentation.
Faye: What’s different about the process off securing a CapEx Term Loan over a standard term loan?
Ed: Shawbrook reserves the right to request evidence the loan will be or has been used to fund CapEx projects. We may require the end customer to evidence how the funds have been utilised to ensure that it fits with the criteria of the product, and we’ll do that in partnership with the broker.
Faye: What are some of the drivers for change at a macro level that CapEx Term Loan fills a gap?
Ed: Businesses are increasingly seeking quick access to funds at a fair price with flexibility for how they spend the funding. As funders continue to tighten criteria and loan-to-value ratios on soft assets, remove assets from appetite, or charging high unsecured lending prices there is a growing number of cases where accessing finance is becoming more difficult. By looking at the borrower, their business growth plans, and strategic initiatives more so than the asset, we firmly believe that the CapEx Term Loan plugs a significant gap in the funding landscape and will help SMEs execute their growth ambitions.
Faye: Thank you for your time, Ed. Where can brokers go to find out more about Capex Term Loan?
Ed: If they’re an existing broker and have a potential case, the easiest way is to submit it through the Broker Portal. Or if they want to have a chat first, a phone call to their BDM is a great starting point. And if they’re not on panel already, they can find out more about working with us below.
CapEx Term Loan Highlights
- Terms from 1 to 3 years
- Fixed rates
- No early repayment penalties
- Personal guarantee required
- Values from £15k to £100k