Pre-historical Case Study: Can Spark finance dinosaurs?

The requirement

A farming business was referred via Spark Connect by one of Spark’s Partners. The client wanted to invest in decorations to enhance the family-friendly interactive space they have in the business.

They wanted to preserve their cashflow, so they were seeking £40,000 to fund dinosaurs, singing toys, and other decoration items.

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Challenges

As the nature of the assets are purely decorative, they are non-income generating, which made a funding approval more challenging.

Additionally, the items were classed as soft assets, reducing the amount of lenders that would have an appetite for it.

Furthermore, the client had slightly adverse credit profile.

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Outcome

Spark successfully secured the required£40,000 in Asset Finance to fund the toys, protecting the business cashflow.

Spark can indeed fund dinosaurs, as well as singing animal toys (and plain decorations).

Spark's Head of Asset Finance Commentary

Although this was a relatively straightforward deal with few complexities, the items being funded were far from ordinary. Our Head of Asset Finance David Fry commented, “The biggest challenge was that the assets themselves weren't revenue generating, which reduced lender appetite.

A simple solution would have been to consider an unsecured loan, where the asset becomes irrelevant. However, this would mean our client losing the tax benefits associated with leasing these items and likely paying a higher rate.

Thankfully, our lending partners understood that, for that business, the setting and scenery are integral for the overall experience.

I'm really pleased to have delivered exactly what the client needed—and to have added life sized dinosaurs and singing barnyard animals to the list of assets I've funded for businesses!"

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Why are dinosaurs and singing toys soft assets?

Soft assets typically refer to intangible resources such as intellectual property, brand reputation, software, and human capital, which add value to a business but do not have a physical form. Soft assets are often associated with higher risk and, as a result, may come at a higher cost in the market.

In this case, although the assets are tangible, in the event of default they could pose challenges for lenders in terms of recovery and resale. Additionally, as mentioned, they are non-income generating, which support further their classification as soft assets.