The Head of Commercial Asset Finance at Absa Bank Uganda and president of the Uganda Leasing Association, Adad Iraguha has revealed that approved suppliers and dealers in Commercial Asset Finance have led to promotion of the customer’s ability and willingness to repay the credit contract.
Iraguha said during a virtual discussion on the Commercial Asset Finance industry in Uganda. Asset finance is the practice of using a company’s balance sheet assets as a security to borrow money or take out a loan against what you already own. This provides a secure and easy way of getting working capital for business.
The commonly leased assets in Uganda include; grey motor vehicles, plant and machinery and brand new motor vehicles. The amount loaned depends on the value of these assets which the finance is secured against.
Iraguha warned that Suppliers’ non-performance could have a major bearing on the future market value of the asset. Factors such as whether the supplier is merely an agent or has manufacturing representation in the country or is directly owned by the manufacturer are very important in risk assessment.
“A supplier is only as good as his ability to honour future servicing, maintenance and warranty obligations. Clients often do not honour there agreements if the asset is not functional. The quality of the supplier becomes more important if they offer any guarantee of any nature what so ever and for this reason, we will prescribe special controls in this instance,” he said.
He said the quality of a supplier also has an effect on asset quality in different countries. An asset that retains value in one country may not have the same value in another country. This anomaly is usually caused by the strength and historical stability of the supplier.
Some assets have lower resale values than others because of the nature of work they do or because of a high degree of obsolescence, which is sometimes caused by frequent technological changes or the work application of the asset. Computers for example which are continually subject to technology changes, have little or no future market value.