Unlock cash tied up in your assets

By Mark Qualter

Posted: 28th March 2012 09:48

The Invoice Finance industry continues to enjoy considerable growth, with recent figures from the Asset Based Finance Association showing that firms which use invoice finance are enjoying continued strong growth in their sales, up 13% to year end 2011.  Total client turnover in 2011 for companies using invoice finance reached £238bn.  Although it is now much more accepted as a method of funding working capital, there still remains negative connotations because of its origins in factoring, with many still viewing invoice financing as a ‘last resort’ borrowing option.  In reality, the product has evolved in sophistication over time and the recent emergence of Asset Based Lending (ABL) in the UK has seen the industry really come to the fore.  

ABL is a specialist loan product that provides fully collateralised credit facilities to borrowers and comfortably supports high growth ambitions and intensive working capital requirements.  It also supports seasonal trade.  ABL can work well for businesses with high financial leverage and/or marginal cash flows.  More and more companies are recognising the benefits of using ABL because it allows management teams to use their assets – be they inventory, plant and machinery or real estate, to unlock greater funding and provide the necessary headroom to support growth and deliver value.  Plus, as the underlying assets increase in value, the size of the facility can grow to accommodate the requisite funding.  ABL can and often does provide a more attractive alternative to traditional lending products and can ease seasonal cash flow fluctuations whilst providing borrowers with more liquidity and fewer financial covenants.

RBS IF has a dedicated and experienced team with specific expertise and extensive knowledge within the corporate arena, bringing together specialists in ABL and receivables funding.  They can deliver tailored, value added and bespoke solutions which address your financial and business needs.  ABL can be used to support working capital, acquisition finance, business restructuring and capital expenditure.  This proposition becomes even more attractive for clients when combined with the array of complimentary banking products which the RBS Group can provide.

Mark Qualter explains:

“One of our key focus areas is increasing the profile of ABL as a viable and mainstream funding solution and over the last year we have strengthened our ABL team, led by Chris Hawes, Director of the UK Corporate business. Our track record of executing deals includes using ABL to support acquisitions, working with specialist and mainstream financial sponsors and equity houses.  We are fully immersed in the culture surrounding the completion of such complex and time sensitive transactions.  We have listened to the requirements of the acquisition finance community and have added people with leveraged and acquisition finance as well as legal credentials to our ABL team.

RBS IF has supported a number of high profile clients with ABL funding lines. Our deals over the last two years include working with the sponsor community on the likes of Crown Paints and Hewden Stuart.  The Walstead Investments £20million acquisition of the web offset printing subsidiary of St Ives plc is another great example where we worked to deliver a highly effective debt structure using ABL.  We provided a £41.6million, three-year ABL facility to refinance existing debt, in addition to ongoing working capital facilities and the debt to complete the £20 million acquisition itself.  We not only delivered the required funding but also met the significant time pressures created by the disposal of a division by a PLC which resulted in the completion of the deal within five weeks.  It is reasonable to say that such a transaction would have been almost impossible to complete under a more traditional structure.

Another recent example is Edinburgh-based BenRiach Distillery Limited (BenRiach), one of Scotland’s most famous independent whisky distilleries.  It is looking to expand its business and consider further acquisitions thanks to a new £27 million ABL package from RBSIF.

Founded in 1898, BenRiach has grown and invested substantially during recent years.  Developments include the acquisition of the GlenDronach Distillery in 2008 and the implementation of a five-line bottling plant in Newbridge in 2010.  The company supplies a range of high-end 12 to 15-year-old single malt whiskies, along with more mature and premium varieties, to customers throughout the world.  Key markets include Western Europe, Asia, North America and, increasingly, Brazil and other Latin American economies.

The £27m deal, which also sees RBS Corporate Banking become the new full-banking partner to BenRiach, is a significant uplift on BenRiach’s previous traditional credit facility and includes an ABL line of funding provided by RBS IF.  Unlike a traditional credit facility an ABL package is fully flexible and grows in line with company sales.  It is offset against stock, and will be used for investing in stock and facilities, general capital expenditure and, if the opportunity arises, selective acquisitions.  The firm currently employs 80 people across three sites including Newbridge. 

Billy Walker, Managing Director at BenRiach, explains,

“With demand at an all-time high we find ourselves in one of the golden periods of the industry, and are delighted to have finalised this funding package with the RBS team in Edinburgh.  Having filled over 10,000 casks of single malt in 2011 for the first time since the distillery changed ownership in 2004, this new funding facility will enable us to expand our business to meet the worldwide demand for our highly regarded whiskies.  It allows us to have plans. It means we can comfortably look at doing additional things – we have headroom.” 

Lorna Bell, Corporate Development Manager at RBS Invoice Finance, said,

“We have structured an ABL facility over a three year period that gives BenRiach the flexibility to improve and invest in new stock as well as consider future global business aspirations.  ABL essentially involves putting up a company’s assets as collateral for a loan and for BenRiach we have been able to link the financing to stock levels to achieve the required funds.”

Security may be required. Products fees may apply

 

Mark Qualter is Director of Strategy at RBS Invoice Finance (RBSIF). Mark joined RBS in 2001, initially working in the Transportation team in Corporate and Institutional Banking in London. In 2004, he was appointed as Head of Large Corporates in Corporate Banking North West based in Manchester and was appointed as Regional Director for Corporate Banking Yorkshire in April 2007. Mark was appointed to Head of Corporates for England and Wales for RBS IF in November 2010 and was promoted to his current position last year.  Mark can be contacted at +44 (0) 7769 242267 or by email at mark.qualter@rbsif.co.uk

www.rbsif.co.uk 

 


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