Helping to Maximise Assets
Having access to sufficient working capital is vital for businesses operating in a recovering economy. The correct financing structure can have a significant effect on an organisation’s success, providing the liquidity needed to grow, adapt, make acquisitions or to simply help to manage day-to-day trading requirements.
Asset Based Lending as a product is at its most powerful at this stage in the economy because access to working capital has never been more important. ABL can unlock the value ‘trapped’ in a company’s assets which can be re-drawn based on availability generated from trade receivables and inventory. For growing businesses this is a very attractive way to fund expansion due to its flexible and agile nature because it is linked to a company’s assets and access to funding is quicker because there is no need to reapply as requirement grows, so long as a company’s assets cover it, the funding line is there. This provides added confidence when seeking out new contracts and the ability to take swift action when buying.
Chris Hawes, Director of UK Corporate at RBS Invoice Finance, explains: “ABL is establishing itself a name amongst mainstream lending solutions as people are recognising the benefits of this innovative and flexible product. It enables businesses to borrow against the value of their trade receivables and inventory to finance the working capital they need. It is an increasingly popular option for businesses looking for help with expansion because they are securing a loan against their company’s assets which effectively frees up a portion of the value of those assets to boost growth.
It’s often used by manufacturers and distributors for example, who often have to invest in materials, inventory, new plants or technology, months before payment is made, during which time cash flow may be restricted.
Initial funding lines are set up to accommodate the highest required funding peak in a firm’s 12 month forecast. This means businesses operate with headroom that is appropriate – having access to working capital when they need it without having to slow business growth or raise equity.
We are very proud to offer our ABL solutions alongside invoice finance solutions to businesses with turnovers of £10 million upwards. In addition to ABL on current assets, RBS Invoice Finance also provides customers with ABL on fixed assets such as plant and machinery and real property when company turnover exceeds £25 million. This solution can generate higher levels of funding based on asset value, providing a significant initial injection of cash and supporting the business on an on-going basis as it grows.
Exponent Private Equity (“Exponent”), a private equity firm specialising in UK business investments last year completed the acquisition of the assets of the Loch Lomond Group for an undisclosed sum.
The assets include the Loch Lomond distillery in West Dunbartonshire, a packaging plant in Ayrshire and the Glen Scotia malt distillery in Campbeltown, Argyll and Bute. Brands controlled by the company include the Loch Lomond and Glen Scotia single malt whiskies, the High Commissioner blended whisky and Glen’s Vodka. The company is led by chief executive Colin Matthews, who previously worked at Imperial Tobacco, where he led the business in Africa, the Middle East, Asia and the Indian sub-continent. Former Diageo chief financial officer Nick Rose has been appointed chairman.
A multi million Asset Based Lending (ABL) funding package to support the deal was provided by a club of three banks PNC, RBS Invoice Finance and Burdale Financial Limited, a Wells Fargo company.
Outlining the rationale behind the acquisition, Colin Matthews explained: “Loch Lomond, Glen Catrine and Glen Scotia have built a sound business platform with brands that perform well in the UK and in a number of international markets. The growth of the Scotch whisky industry in recent years offers a great opportunity to develop further the Loch Lomond business and we are delighted to have Exponent as our partner as we embark on this next exciting stage of our development.”
James Gunton, Exponent added: “We are very excited about the future potential of the Loch Lomond Group. The combined approach and support provided by all three banks was very important. The transaction was complex but what really impressed me was the level of engagement and flexibility from all three funders. Discussions with all parties were very productive throughout the deal.”
David Hunter Corporate Development Director RBS Invoice Finance, said: “This is a very exciting deal and we are delighted to work alongside our colleagues in the syndicate to structure the right funding line to support the acquisition. The future for whisky sales is very positive as volumes are increasing internationally and the ABL facility provides the flexibility to support the growth strategy of the new management team as they seek to invest in the future.”
It is clear that ABL financing is continuing to play a significant role in boosting the UK economic recovery as Chris Hawes reports that since 2009 RBS alone has provided over £1.5billion in ABL facilities. The Asset Based Finance Association (ABFA) recently announced that its members currently provide £19.3 billion in funding to over 43,000 client businesses in the UK and Ireland and that UK businesses have traditionally been more rapid adopters of innovative financial products than the rest of Europe. The ABFA says that asset based finance represents 15.7 per cent of the UK’s GDP compared to a European average of 8.5 per cent.
Security may be required. Product fees may apply.
For further information please contact:
Chris Hawes, UK Corporate Director at RBS Invoice Finance
Tel: 020 7672 2593
RBS Invoice Finance Limited. Registered in England No. 662221. Registered Office: Smith House, Elmwood Avenue, Feltham, Middlesex, TW13 7QD