Banking & Finance Team (MHA)’s Post

Transcript

Hi, I'm Greg Taylor, Partner and Head of Banking and Finance at MHA. I'm joined today by Tim Wilkinson, Commercial Broking Director for the Midlands Region and we're going to be talking about asset based lending. Very early on, we can get a good idea of what a facility might look like based on certainly the last two or three years worth of filed accounts, management accounts and that includes the PNL, that includes the cash flow. If we've just had a year, got the year end done, we need the management accounts at that year end and then moving into the current. Financial year, the age receivables Ledger, the aged purchase Ledger. Interestingly, I think it's quite important that again this is where we come in is just some commentary on billing that may remain in the end couple of columns of not only the sales Ledger but also the purchase Ledger. So if there's some chunky balances out there, let's get the answer now as to why that is. Is that, is that a hole? We're filling, Yep. So yeah, bit of an understanding about the sales Ledger, the purchase Ledger. We've got the management accounts, we've got year end audited accounts or filed accounts and forecasts where we're into an asset based or asset backed lending proposition forecasts. Are needed within the pack fairly early on so that the lenders can get a bit more of an appetite as to where where the business is going. Don't be surprised if the lender as the process evolves, they then want those integrating so the the facility overlaying within the cash flow models. So again, you know, bit of work. But it's for a wider holistic, Yeah. And then just the key, the key pillars when we've got that. So you'd have the sort of initial phase with the initial quote. And then where do we go from there? We get the initial terms based on the basic information. And then at that point, it's right. Does the client wish to move forward with any of the any one or two of these? There will usually be ideally be a face to face meeting which then gets us towards a heads of terms. That may or may not have involved a credit committee. I much prefer it where those indication of terms had at least a sighting. I've had at least a citing paper. And again, it's part of what we do is like anybody can do an indication of terms what involvement of credit had in this. So it's getting an understanding of. So we're not going all the way down the line and then all of a sudden it it falls and then those indication of terms will then. Indicate not surprisingly what the next steps are. That will invariably involve a survey stroke review of the the business and its procedures. Quite often that will focus purely on the receivables Ledger because that often forms quite a bit of the the asset based or asset backed lending proposition and that will be the procedures and protocols that are used for raising the billing. Amazing the invoices, what security it offers to the lender. Where there's a cash flow piece or a term loan being included or or added in, there might be a requirement for financial due diligence so that again can. Overlay another additional cost, but more time, but that's really only when there is a cash flow piece, term loan piece going in. Property valuations would be required. So it's like any of the bits in isolation, but you're going to get like herding cats. You've got to bring them all in together to get to a point where the lender is going well, OK, Yeah, well, we're happy at that amount. We're happy. That amount you've got the stock and that's an interesting one in terms of how much cash it really generates, you know. And it's a useful tool to have in terms of generating more working capital for the business, especially if it's looking at the wider supply chain of, you know, maybe goods coming in from the Far East. How we pay those suppliers, what the letter of credit terms may or may not be, how much stock we've got sitting in UK or indeed overseas where it wherever it may be and. I think again there's individual valuers that are used for stock. It's another layer in the process and we can make we can coordinate, we coordinate all of that. Yeah, we know, we know all of the the surveying type firms that will go out and and look at crime business be that on you know, stock receivables, et cetera. So that's yeah, that's the process gets underwritten. We get to credit back fully credit back terms and off we go into. The legal process which surprise, surprise can take some time. Tim, thanks very much for coming in. If you want any more information on asset backed or asset based lending, please visit our website at www.mha.co.uk.