Funding The Habit
Racing anything with wheels can potentially have an inherent element of expenditure – there’s no other way of putting it. And it’s not just the cost of the car – to run any vehicle in a race series can require a significant investment in both time and money. But as you and anyone else involved in the sport knows, it’s most definitely worth it!
It is, however, not widely appreciated that covering all aspects of the cost of the habit can be financed in some way or other – but we have been doing it for years with competitive structured payment plans. From junior karts to LMP cars, racing services equipment to motorhomes, transporters and single vehicle trailers to show stands and support vehicles. We can even finance software for use in team and race car management. In basic terms, if an item has value you can borrow against it, reducing the need for capital expenditure and freeing up cash flow.
So how does this work? The purchase of a race car, for example, can be an easy and straight forward process with repayment plans for up to seven years in some cases. The loan to value ratio varies according to the asset involved but is generally 80%. However, we will often consider higher amounts if the asset has a clearly identifiable market value. The main historic issue has been that a race car is generally not insured for use on track, which has been part of the terms and conditions of loan agreements in the past. We will look at each case carefully and work with you to establish whether on track insurance is actually needed; there is clearly a difference between an MX5 for example and an original Shelby AC Cobra. And of course, there is also much more availability in terms of track and race day insurance, albeit at a cost. With the insurance issue covered, the term and loan structure agreed, there is only the underwriting of the application to be concluded.
What does this involve? The credit assessment side of the process is again quite simple and the part we work closely with you on. The majority of modern race cars are funded through a business entity of some kind (which helps with the VAT recovery), but can be bought personally too. In either case the same three elements of underwriting apply. Is the applicant clearly identifiable? Proof of being able to service the debt? And is the asset being loaned against worth the money being borrowed against it? With all the suitable information provided, this can be cleared within 2-3 working days, with a drawdown time line of 3-5 days maximum.
To summarise, any race vehicle, from a Kart to LMP car and beyond, can be financed. The process is simple and quick freeing capital to operate through the season uninhibited. The terms are structured around you and available to corporate entities or individuals. The costs involved are competitive and you are working with an institution that understands the sport and surrounding environment.
Originally featured in Motorsport UK’s Revolution Magazine – July, 2019