The obstacles and hurdles that UK SMEs have faced over the last 18 months have been plentiful. The combination of coping with pandemic restrictions, Brexit regulations, driver shortages, fuel price increases, supply chain issues and the rising cost of raw materials has put mounting pressure on the cashflow of businesses in a host of industry sectors.
When more than one solution is needed
For many small and medium-sized businesses asset refinance is proving to be a valuable funding tool, delivering a dual-pronged solution to their cash flow concerns: helping to reduce monthly commitments and providing an immediate boost to their cash reserves.
Some may think that such a funding option would be a time consuming and complicated process. However, if businesses are working with trusted brokers who are partnering with experienced and knowledgeable funders, this is simply not the case.
A standout example of this is a business helped recently by refinance funding arranged by Praetura Asset Finance (PAF). The client was a well-established plant hire company who during the height of the pandemic had seen their turnover drop by around 15%. The company had continued to service all their clients and trading levels were recovering well. However, holes within their cash reserves were starting to appear and there was a HMRC Time to Pay order looming, with a substantial payment due at the end of October.
Whilst the company’s policy of replacing all equipment when three years old was one of their key selling points, due to supply issues caused by multiple factors in 2021, this policy was also causing the company major issues, with over £5 million worth of plant on order, but those orders facing delivery delays of up to six months or more. With no new kit available, the ability to take on new work whilst servicing existing contracts was diminishing. Another mitigating factor was the rise in the price of the equipment. The business was putting their prices up to offset these increases, but the proceeds from this were going to take time to filter through to their balance sheet.
The company needed a dual solution, an immediate injection of cash into the business to plug the gaps that the last 18 months had rendered and see them through the quieter months of December and January (with sites closed over Christmas and New Year), as well as assistance over the longer term by reducing their monthly outgoings.
Asset refinance provided the ideal solution
Time was of the essence and once the call from the broker had been received by Paul Mountain in PAF’s Business Development team, the wheels were swiftly put into motion. Following conversations with the broker and research on the business and assets, the proposal was submitted to Credit and a Zoom meeting was arranged between the client’s Finance Director and PAF’s CEO and Credit Director. At the end of that call an asset refinance funding facility totalling £1.8 million had been agreed to in principle (subject to checks and due diligence).
With the timeline from the first call to the first payment of funds taking just over a week, the presumption might follow that the deal itself was straight-forward. This is a perfect illustration of the benefits of working in partnership with a funder who specialises in asset refinance funding, one who can mobilise their team to arrange everything for you, to make complicated processes hassle free.
This deal involved 81 assets, on finance with a variety of lenders, in 60 locations across the UK, and with the HMRC deadline looming there was not time to see all assets on site.
In the same way that Praetura made use of technology with the directorial Zoom call, the same happened with regards to the asset valuations and inspections, which were a combination of desktop valuations and market-book (with valuers unable to conduct site visits in the time constraints), along with walk-round verification videos of 20 assets randomly selected by the underwriter.
PAF Business Development Manager, Paul Mountain, commented: “This was a monumental team effort from everyone involved, showcasing the very essence of how we work at Praetura, different departments working together, putting the time in to make the deal work”.
This asset refinance funding facility paid just under £1 million of outstanding finance with 15 funders, gave the business an immediate injection of capital of over £800,000 and provided a reduction in the company’s monthly repayments of £15,000 per month.