ABLs still lending despite the recession
According to LC Factoring Advisory Service, one of the UK's central resources for factoring advice, Asset Based Lenders (ABLs) represent one class of lender not avoiding deals in the recession. However, there is a changing attitude to risk which, if not carefully managed, will adversely affect many UK businesses.
"UK companies are borrowing more against assets" says Les Gordon, Director at the LC Factoring Advisory Service, "as bank lending continues to contract and forces them to look for alternative forms of funding. As one of the UK's central resources for factoring advice, we have certainly seen a pronounced increase in Asset Based Lending over the last 12 months and expect this to continue for the remainder of 2009.
"The most widespread trend in the current ABL market, and a serious challenge to the UK businesses which reply upon it, is a changing attitude to measuring risk."
Les also asserts that many ABLs are currently reviewing their own balance sheets and seeking to divest themselves of certain clients - based on a reassessment of their perceived potential risk in worsening economic conditions. He continues: "Many different sectors have been branded risky' and, as a result, many companies have been forced to seek an alternative source of funds.
"There are however, funders still willing, and able, to lend. Many successful ABLs remain committed to expansion into wider markets, and I am happy to say, that we have been successful in finding new facilities, and managing transition periods, in most cases we have handled."
He explains: "Where companies are no longer economically viable, and their current ABL is seeking to manage them away because of this, there is also hope. In these circumstances, and where struggling companies are seeking to improve their chances of funding with a turnaround strategy, the most common problem is VAT and PAYE debt.
"The crucial point to make here is that acting quickly is everything. Sometimes the situation is only brought to light once serious levels of arrears have been amassed, which can be alarming for a potential lender. Speaking to us early - as soon as any arrears come to light - significantly increases both the range of options we can bring to bear and the positive impact of our professional involvement.
Often, in spite of VAT and PAYE arrears, there can be a strong case for supporting a business, and we can agree time to pay with HM Revenue & Customs. This type of action is repeatedly proving to be enough to put many companies back on a surer footing. At LC Corporate Strategies we have a 90% success rate in such negotiations.
Company insolvencies are likely to continue to rise through the recession. We are now seeing the effect of this on the ABL market in the form of a shift of emphasis from putting on sales and encouraging double digit growth, to a much greater focus on risk management.
Leonard Curtis Factoring Advisory Service advises companies across the broad spectrum of the ABL market. It provides confidential advice to match clients with factors best suited to their specific needs.
For more information, or to contact an advisor, visit www.factoringadvisoryservice.co.uk
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