32 THE KNOWLEDGE
USE YOUR ASSETS
While the credit crunch and the ‘R word’
dominate the headlines, the fact is that for the
majority of us in business, life has to go on. Now
more than ever before, the only way to guarantee
the survival of your business is access to working
capital and a renewed focus on cash flow. Evette
Orams reports.
It is fair to say that lenders are passing on their own recent reality
check to their customers, by way of reduced lending, higher
rates and insisting upon more security for borrowing. For the past
5 years raising finance has very much been a buyer’s market,
with lenders falling over themselves to provide unsecured finance
to businesses based on high multiples of EBITDA. While the high
street banks are nursing their wounds from the losses they have
incurred in the sub-prime market, there are still plenty of bank and
non-bank lenders ready to finance your business.
However, the rules have been revised.
Today, and for the foreseeable future, lenders will focus on
matching lending to assets, so, as a business owner, the skill is to
know which lenders will generate the most cash flow against the
assets on your balance sheet.
Given the circumstances facing many UK businesses today, Asset
Based Lenders come into their own: they allow a business to
According to recent figures, almost 50,000 companies in the UK
leverage a higher level of finance than more traditional funding
routinely use Asset Based Lending (ABL), a growing proportion of which
methods. ABL generates cash against a wide range of assets such
are larger companies and many of whom are using the products to
as trade debtors, stock, property, plant and machinery and even
help fund mergers and acquisitions. During the first quarter of 2008,
intangible items such as brands or future orders, while keeping the
companies with a turnover in excess of £5m using this type of funding
relationship with one provider.
now borrow over £11.4 billion, an increase of 20% since Q1 2007.
Among those to have done this to replace traditional bank debt are The flexible approach employed by many Asset Based Lenders
corporates such as Austin Reed, MFI and Woolworths. enables them to focus on the fundamentals and future prospects
of the business than the immediate trading. There are hundreds of
As the ABL market continues to develop, providers are developing such innovative lenders out there. The trick is to find the synergy
strong niches where their clients can benefit from greater added necessary between funding partner and business to create the
value. For example, in 2007, export invoice finance, a form of Asset optimum solution tailored precisely to the borrower’s needs.
Based Lending, rose by 25% as both independent providers and
the high street banks continued to develop their pan-European Source:
capabilities to help fund customers’ trade flows abroad. This is a Evette Orams is director of Hilton-Baird Financial Solutions
trend which looks set to continue as businesses seek out ever more
Businessfinance@hiltonbaird.co.uk
customers further afield.
www.hiltonbaird.co.uk
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