Asset Based Finance

ASSET BASED FINANCE In partnership with:

ASSET BASED SPECIALFINANCE FEATURE In partnership with:

DONE DEAL At PNC Business Credit, ‘Done Deal’ is more than a tag line. It defines our business.

Widely regarded as the UK Asset Based Lender of choice by the Private Equity community, advisors and companies alike, we provide funding for mid-market companies that delivers detailed understanding and flexibility, combined with unparalleled access to our senior team.

DONE DEAL

A portfolio company of H2 Equity Partners

£39,000,000

DONE DEAL

DONE DEAL

£9,000,000

£15,000,000

Asset Based Lending

Asset Based Lending

Handbag and Accessories Wholesalers

Vehicle Testing

Asset Based Lending UPVC Building Products

DONE DEAL

DONE DEAL

DONE DEAL

£7,698,000

£5,000,000

£8,400,000

Asset Based Lending

Asset Based Lending

Asset Based Lending

Welding Equipment Supplies

Mobile Generator Sales and Hire

Promotional Merchandise Supply and Manufacture

Do you have a deal that needs to get done? peter.whatson@pncbusinesscredit.co.uk +44 (0)121 262 4055 | +44 (0)7796 173462 PNC is a registered mark of The PNC Financial Services Group, Inc. (“PNC”). PNC Business Credit is the asset-based lending arm of PNC Bank, National Association, a wholly-owned subsidiary of PNC and Member FDIC. Lending products and services require credit approval. GEN-3424 ©2010 The PNC Financial Services Group, Inc. All rights reserved. Member FDIC

SUMMER 14

FINANCE PROFILE

WHAT IS ASSET BASED FINANCE (ABF) AND HOW DOES IT WORK? The term ‘asset based finance’ (ABF) is used to describe a number of commercial finance products available to businesses. Put simply, they involve funding provided by a financier on the basis of the assets contained within a client business One of the most significant ‘assets’ that a business will have will be the debts owed to them by their clients - represented by their unpaid invoices - and for this reason ABF is often referred to as invoice finance, but strictly speaking the terms are not interchangeable.

In the UK there are two well known invoice finance products; invoice discounting and factoring. Both products provide a business with the ability to draw money against its unpaid sales ledger. To provide this, the financier advances an agreed percentage of the value of the sales ledger to the business, effectively using the unpaid invoices to secure the funding. Each offers an immediate availability of funds of around 80 per cent to 85 per cent of the value contained within the sales ledger. The remainder is available to the client when the customer pays, less the financier’s fees: Factoring - provides firms with the working capital to operate their business, together with an outsourced sales ledger and collections service, plus the option to transfer the risk of debtor failure to the financier.

Invoice discounting – is similar to factoring, but for businesses that prefer to carry out their own credit control. It provides funding together with the option to insure the debtor

Jeff Longhurst, chief executive of the Asset Based Finance Association

risk and can be provided on a confidential basis without disclosure to the debtors.

In addition to the two main invoice finance products, asset based lending (ABL) is the third product offered under the ABF banner. Where invoice discounting and factoring are pure revolving cashflow facilities secured against the debt purchase, ABL solutions normally offer a combination of such a facility based upon the debts and assets such as stock, and an amortising loan secured on other assets within the client business.

What issues should a business consider in

Invoice finance works well in most sectors and is extremely well suited to such sectors as staffing, construction, manufacturing and professional services

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order to decide if ABF is the right option?

It might seem obvious, but a business should always consider the nature of their funding requirements and then look at what funding solution (or solutions) is going to best meet its needs. An overdraft or a term loan might work for some businesses; if a firm is looking to acquire a piece of equipment, then leasing or hire purchase is likely to be the best solution. But, if what a business really needs to do is to unlock its cash-flow and/or raise additional funding based on its other assets, then asset based finance products are likely to be the answer. Beyond this, businesses need to consider the suitability of their sector and type of business. Invoice finance works well in most sectors and is extremely well suited to such sectors as staffing, construction, manufacturing and professional services.

However, it can be less suitable for those firms with complex sales contracts, for instance those with complicated after sales warranties or stage payments. You can see if your business may be suitable for ABF and find vendors that are best able to suit your requirements at: http://s.abfa.org.uk/1sadPav Funding via asset based finance is generally directly related to sales growth and so grows in-line with the business. This gives the user the added benefit of not having to constantly rearrange funding lines. Furthermore, products such as factoring offer SMEs additional administrative and/or debtor support which can be extremely helpful and cost effective when trying to grow a business. n Jeff Longhurst, chief executive of the Asset Based Finance Association

BUSINESS BUSINESSQUARTER QUARTER||SUMMER SPRING 14

FINANCE PROFILE

SUMMER 14

The asset based finance sector helps drive the UK’s economic recovery New research from digital marketing agency SiteVisibility shows that ‘invoice finance’ was amongst the most popular website search terms when it comes to business finance last year. This demonstrates the growth and interest from businesses which the asset based finance (ABF) industry is currently seeing.

Since the dark days of 2008/9, the total annual turnover of the industry’s client base has seen a strong upward trend, from £211bn in 2010 to more than £250bn in 2012. Last year this reached over £275bn. The industry is continuing to surge forward with figures demonstrating the strongest performance since the recession. Figures for quarter four 2013 show the industry advancing more funding to SMEs than ever and record annual turnover for clients. Total client funding has also reached record levels. In December 2009 the balance was £13.9bn, but since it has grown steadily to hit over £18bn, an aggregate growth of 32% with an 11% increase in 2013 alone.

This has supported significant growth in clients’

sales. At the close of 2013, the sales of ABF clients had increased by 10% year-on-year compared to a GDP growth of just 1.8%. With the 2010 client sales figure being £211bn, this shows a cumulative current growth of some 30% in three years, underlining how much the industry has supported UK and Irish firms since the financial crisis. The quarterly sales figure of £72.7bn is also a record high, up £1bn on the same period last year and only the second time over the £70bn mark for a single quarter.

Export figures for both factoring and invoice discounting are also showing robust growth, with year-on-year increases of 18% and 12% respectively. Four in five businesses using ABF have turnover under £5 million. Many smaller companies find factoring advantageous in allowing the outsourcing of credit control, freeing up management time to focus on the business. Invoice discounting and asset based lending (ABL) are increasingly popular choices for growing and larger businesses however and a considerable proportion of the increase

in funding provided by the industry overall is via these facilities. The industry provides more funding to clients in the £100 million+ turnover bracket than any other segment, £5.5bn at the end of quarter four 2013. Apart from financing growth opportunities, the demand for ABF is also driven by increasing requirements for working capital. A recent report from Sage Pay indicates SMEs are owed £55bn in unpaid invoices. With the Government focusing on payment practices and access to finance, the role of ABF in helping business has never been greater. All of which makes a big statement.

ABF is providing record funding to over 43,400 clients, which in turn is supporting high sales.

The figures are extremely heartening and show the industry is playing an integral part in the UK’s economic recovery.

For more information on how Asset Based Finance can help your business grow visit www.abfa.org.uk and to view a series of ABFA member case studies visit https://s.abfa.org.uk/1khGgCJ

Flexible Solution Driven Finance BNP Paribas Commercial Finance supports the mid-corporate market in the Midlands by delivering high-value, multiproduct working capital solutions in both domestic and cross border markets.

BNP Paribas Commercial Finance is part of the global BNP Paribas Banking Group and a European market leader for invoice finance in terms of geographic coverage, turnover and revenue.

Call us on - 0845 693 1433 and find out how our flexible finance solutions can be structured to assist you in meeting your business objectives.

BNP Paribas Commercial Finance Ltd is a member of the Asset Based Finance Association (“ABFA”) and as such we are bound by the ABFA Code for Members. For more information about the Code please visit www.abfa.org.uk/standards/overview.pdf

BUSINESS QUARTER | SUMMER 14

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http://commercialfinance.bnpparibas.co.uk

SUMMER 14

COMPANY PROFILE

Access to working capital for the growing business is alive and well Gerry Donnelly, Director at FRP Advisory, Birmingham offers a business advisor’s perspective on the benefits of Asset Based Lending Since the onset of the banking crisis more than five years ago, it has become increasingly common to hear Small and Medium Enterprises (SMEs) and their advisors complain about the lack of available bank lending to help support working capital needs.

As we enter a period of regrowth in business banking, the complaints in some corners persist about access to capital. But has access to working capital really continued to tighten? Or is there a new norm, where the lending world, including the big high street banks, has diversified its offering in a shift away from the traditional overdraft-based principle to lending and into other areas of credit based more on the principle of cash-flow?

This shift in approach to lending is all about providing more security for both parties - creditor and debtor, business owner and investor and lender - in the way the capital is borrowed, invested and provides a return for management and stakeholders. FRP Advisory, along with its independently managed commercial broking arm First Financial, works closely with advisors and companies to acquire alternative sources of funding. Both FRP Advisory and First Financial have found that whilst the appetite of banks to provide overdrafts has definitely decreased, the Asset Based Lending (ABL) arms of both the banks and independent lenders is stronger than ever, including their desire to provide funding to SMEs. If SMEs require working capital funding and bankowned and independent ABLs want to provide this type of funding, why does the perception of a dwindling access to capital still linger? Despite the hard work of the Asset Based Finance Association

Gerry Donnelly, Director at FRP Advisory

(ABFA), the trade body which oversees and promotes ABL, a perception still persists among SMEs (and in many cases among their advisors) that the use of an ABL facility is indicative, however wrongly, of a failing business. The old “lender of last resort” stigma still remains.

An analysis of the ABFA’s annual industry statistics tells a story of a mismatch between a clear supply of lending available in the form of ABL and demand among companies for working capital solutions.

Whilst a recent survey revealed that approximately 400,000 companies in the UK would be suitable for an ABL facility, at the end of December 2013 only 43,485 firms had such a facility in place.

Significantly that marks a drop of over 100 in four years, from 43,590 ABL facilities in December 2009 at the height of the banking crisis, all while ABLs were increasing their willingness to increase funding levels. Among smaller companies (up to

FRP Advisory, along with its independently managed commercial broking arm First Financial, works closely with advisors and companies to acquire alternative sources of funding

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£1.0m turnover) the decline in ABLs is even more acute, with 21,000 in place at December 2013, a fall of 3,000 or 12% over four years.

ABL has proved more popular with larger companies (turnover in excess of £10m), growing 41% over the same four year period from 2,900 to 4,100 firms. There are also now 335 large companies with turnover in excess of £100m using ABL funding, a 52% rise over four years.

The world of ABL has become increasingly more sophisticated and has moved well away from the days of simple factoring. SMEs of all sizes can now obtain Confidential Invoice Discounting (CID) facilities. There are also a number of bank-owned and independent lenders offering facilities to the construction industry, something which was previously unheard of. FRP Advisory believes that ABL is the most readily available form of working capital funding in today’s lending markets and that it is suited for businesses seeking to grow, or to secure their day-to-day working capital needs, regardless of their size. It is no longer a “lend of last resort”, but a sophisticated financial product, which can help businesses maximise their cash flow and therefore their ability not just to survive in an economic downturn, but to grow when the market changes. Access to working capital is alive and well and an asset based lending approach can give companies, both large and small, the security to borrow for growth.

For more information please contact Gerry Donnelly on 0790 896 2086 E: gerry.donnelly@frpadvisory.com www.frpadvisory.com

BUSINESS QUARTER | SUMMER 14

SUMMER 14

COMPANY PROFILE

Growth is on the agenda for Midlands businesses Paul Edmeades, Business Development Director, GE Capital UK, has over 20 years’ experience in asset based lending (ABL). Paul leads a team of experienced ABL professionals from GE Capital’s offices in Birmingham city centre, with a primary focus on the Midlands region. Paul shares recent activity at GE Capital and the SME market outlook.

2013 saw early evidence of sustained growth in the UK, with many economic experts revising forecasts upwards and a rise in business confidence. 2014 has already seen manufacturing output in the Midlands grow at its fastest pace for nearly 16 years, with market projections showing stronger growth to come. In fact there is continued business optimism across the region with a record number of manufacturers (47%) planning to boost investment in the next quarter*. Growth is on the agenda and at GE Capital we have helped many SME and mid-market businesses raise finance to fund their growth aspirations.

Findings from GE Capital’s Capital Expenditure Barometer – Capex Research**, reinforces this optimism. The research, conducted amongst 2,250 SME business leaders across seven European markets earlier this year shows that UK SMEs intend to invest an estimated £58.6bn in the next 12 months, a 12% increase on their spending intentions of 12 months ago.

In the same 12 month period, UK SMEs also plan to expand the workforce, creating over 661,248 new fulltime jobs (up 26%), with overall, net confidence at 54%, up 21% on last year.

Finding the best way to fund business investment is never a case of one size fits all, which is why GE Capital provides smart, flexible and tailored finance solutions wherever a business is in its growth lifecycle.

Paul Edmeades, Business Development Director, GE Capital UK

In recent years, solutions such as invoice finance and ABL have come of age as some businesses look beyond standard-term loans from traditional lenders to solutions that offer greater flexibility and clarity. In particular GE Capital’s ability to provide funding, not only against receivables but for inventory, plant & machinery and property as part of a complete package, has helped support a number of businesses across the region.

According to the latest figures from the Asset Based Finance Association (ABFA) the total

Here in the UK we have helped fund and build businesses over the last 40 years. Annually we supply more than £10bn in working capital to more than 40,000 UK businesses

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number of businesses using asset based finance has risen to over 43,000, funding total advances to clients of £18.3bn in one quarter (Oct 13 to Dec13) and supporting relative total customer sales for 2013 of over £275bn, a growth of 10% year-on-year.*** Here in the UK, GE Capital has helped fund and build businesses for over 40 years. Annually we supply more than £10bn in working capital to more than 40,000 UK businesses. But funding is only half the story; we understand there is a need to provide more than just financing. GE Capital brings insight, knowledge and expertise, gained from over 130 years of industrial and global heritage, to our customers, helping them to reach their business goals. We know that better capital builds better businesses. *EEF Manufacturing Outlook survey Q1 2014 ** GE Capital’s SME Capex Barometer is a regular survey designed to provide an on-going view on investment intentions of SME’s in the United Kingdom. *** The Asset Based Finance Association Q4 Report, October- December 2013, www. abfa.org.uk

If GE Capital can help your business grow contact Paul via email paul.edmeades@ge.com or phone 07703 107488. www.gecapital.co.uk

BUSINESS QUARTER | SUMMER 14

INVOICE FINANCE // STOCK // P&M // TRADE // PROPERTY

You build the business.

We’ll build the confidence.

e flexibility and expertise of an independent, together with the strength and extended product range of its parent, Bank Leumi (UK) plc, make a winning combination. Specialising in structured ABL facilities up to £25m with exceptional levels of client service.

Automotive components manufacturer required flexible funding to support fast growth

£20m turnover poultry business required flexible funding to support growth plans

Leumi ABL provided

Leumi ABL provided

£7m ABL facility including CID, P&M, cashflow loan + funding from Bank Leumi (UK)

seasonal multi-million £ CID facility

To find out more about the Leumi ABL approach to business call Jason Holland on 07824 486820 or email jholland@leumiabl.co.uk or visit www.leumiabl.co.uk Brighton ■ London ■ Birmingham ■ Leeds ■ Manchester ■ Reading ABL MULTI FINANCIAL AWARD WINNERS 2013 -2014 World Bank 2013