Gill Oliver talks to a local taxi firm that has financed growth without the help of banks

The boss of Oxford’s largest taxi firm recently took delivery of 12 new vehicles.

The deal, worth more than £400,000, allowed Niaz Mohammed to keep expanding Osney Mead-based Royal Cars.

With a 600-strong fleet of taxis and bank of 400 owner-drivers, it joined forces with rival firm 001 Taxis a year ago.

Now, thanks to the new vehicles, it has taken on 10 new drivers and four office staff.

The hybrid cars are also good for the bottom line, with minimal fuel consumption and ultra-low CO2 emissions, particularly when driving in congestion, stop-start traffic and at slow speeds.

When stationary, the petrol engine switches off to lower fuel consumption further.

And due to the 20mph or 30mph speed limits in Oxford’s centre, the vehicles run at almost zero emissions.

When asked to loan cash to buy the cars, the firm’s own bank refused Instead, the money came through a type of funding known as asset finance.

Mr Mohammed explained: “We needed to invest but no one has that amount of money lying around.

“We have approached banks several times before and found they are no good for small firms, or someone just starting out in business.”

“High street banks are only for the big boys.”

Royal Cars’ experience is all too common as, post-recession, high street banks are increasingly risk-shy.

If they are willing to lend, it is often only on condition of match-funding.

As a result many firms are turning to alternative borrowing, including asset finance which is usually arranged through a broker.

More than 500 brokers across the UK provide almost £13bn of funding to small and medium sized firms each year.

And asset finance was used to fund more than a quarter (28 per cent) of all investment in machinery, equipment and purchased software in the 12 months to March 2015.

It works by offering cash loans for equipment and machinery and using that as collateral.

Rates tend to be lower because the assets being purchased are usually owned by the lender until the contract ends, and there is normally no requirement for match funding or personal property, such as a house, to be put on the line.

James Maskill, of Oxford-based brokers UK Asset Solutions, helped Royal Cars find finance for the 12 vehicles, using three different asset finance firms.

He said: “We deal with 15 other funders in the market and compared to high street banks, they are more competitive on the rate and usually ask for less security.

“It is difficult to give exact rates, because it depends on the deal but it would almost certainly be cheaper than high street banks.”

But he added: “People are a bit traditional and assume the first call you make when you want finance is the bank.”

Four of the vehicles, Toyota hybrids each costing £30-35,000, were financed by Investec’s Quantum Funding asset finance division.

Investec’s head of intermediary sales Martin Harries said: “We lend into hundreds of different industry sectors and are often funding replacement equipment which is vital to the operation of the actual business itself.”

He believes many firms are unaware asset finance is available for small purchases.

Investec funds hundreds of assets from ‘harder’ ones such as cars and diggers through to office equipment and espresso machines.

Finance can be spread over three to five years, although it doesn’t tend to be more than three years for IT equipment because of the obsolescence factor.

Mr Harries added: “There are very few sectors that we won’t lend into and we’ll look at all medium, small and large firms, including start-ups.

“If a start-up needs welding equipment that costs just £5,000, we would fund that.

“Being a small, independent business won’t preclude them from obtaining finance.”

For Royal, being able to borrow was essential to its future.

Its fleet must be constantly updated to comply with council regulations which prevent a car more than five years old being licensed as a taxi.

It’s also about image, as Mr Mohammed explained.

He said: “We need to improve on the image with newer cars, so that customers feel safe and have a comfortable drive.

“And we have to be more aware of the environment, which is why we went hybrid plus the new vehicles are more economically viable.

“We are constantly, as in every couple of months, upgrading cars.”