BQ Special Feature: Legal and Finance

LEGAL AND FINANCE QUARTER Your 16 page essential guide

SPECIAL FEATURE INTERVIEW WITH PAULINE BIDDLE

Deloitte’s new practice senior partner in the Midlands.

2015 EMPLOYMENT LAW CHANGES

How UK businesses will be affected

SME GROWTH

SMEs look to make further gains in 2015

ASSET BASED FINANCE

How Asset Based Finance can help grow your business

FU £74 ND M S R OF EM NE AI W NI NG

6 deals in just 3 months!

Finance Birmingham – providing growth capital across the Midlands

Finance Birmingham provided £1m of acquisition and working capital finance to enable Goodfish, a Cannock-based injection moulder, to acquire Powell and Harber, a Worcester-based moulder.

Solihull-based sales-i, a worldwide provider of customer intelligence software, has received £0.4m of development capital funding. The finance will enable sales-i to recruit additional software and sales staff.

Finance Birmingham, alongside Santander, provided the acquisition and working capital finance to fund the management buy-out of Four D Rubber, a Midlands-based manufacturer of rubber latex sheeting.

£0.8m of finance for the acquisition of a commercial property to support Coventry-based Productiv’s expansion plans. Productiv bridges the gap between SME low carbon technology developers and large vehicle manufacturers.

Development capital funding to enable Pure, a Midlands-based telecoms business, to expand its product offering and enter new markets.

£0.8m of working capital funding to enable On-power, a Wolverhamptonbased electrical contractor, to fund its expanding order book. On-power delivers commercial electrical contracting jobs throughout the UK.

Finance Birmingham’s team of experts is fuelling the growth of UK businesses. Get in touch to find out how your business could benefit:

0121 233 4903 / financebirmingham.com Finance Birmingham Limited is authorised and regulated by the Financial Conduct Authority and is entered in the register under registration number 579201.

SUMMER 15

WELCOME

INSIGHTS FROM THE EXPERTS Welcome to BQ’s new ‘Legal and Finance’ section, which will be making a regular appearance in our quarterly magazine.

This will help BQ to guide your firm through those difficult subject areas – finding funds, making the books balance, and keeping all your staffing and operations completely within the latest laws.

Top legal and finance experts from across the West Midlands and beyond will be helping us to provide this guidance.

In the first section we feature Pauline Biddle, who has become accountancy firm Deloitte’s new senior partner in the Midlands. As well as discussing the sector, Pauline reveals how she led the Deloitte team on more than 20 recent

high-profile deals, including the acquisition of Norwich Airport by Sir Peter Rigby’s corporate vehicle, and Lloyds Development Capital’s £30m purchase of Prism Medical.

We are also joined by Ian Holder, of leading accountants Mazars, who describes how SMEs are set to grow this year after a positive 2014 and first quarter. Ian’s report also reveals how recent figures on SME growth make Birmingham the most successful city outside of London for start ups.

On the legal side, we are joined by employment expert Fergal Dowling, of Irwin Mitchell, who details a number of recent and significant changes that will impact UK businesses this year.

These include the new area of shared parental leave, which he believes will become more and more popular for new working mums and dads, and the latest legal judgments on holiday pay.

Back on the finance side, Jeff Longhurst, the chief executive of the Asset Based Finance Association, explains how the economic recovery and the revival of business optimism means now is the right time for businesses to consider investment and growth.

We hope you find these detailed insights on legal and finance matters a useful read. n Steve Dyson, editor, BQ West Midlands

INTERVIEW

SUMMER 15

It’s long been said that auditors are people who found accountancy too exciting, so it’s refreshing to spend time in the effervescent presence of Pauline Biddle.

As she enthuses with passion about every conceivable topic on the corporate landscape, you immediately sense why she’s made such an impact on the Big Four firm she joined barely a dozen years ago.

Pauline first became involved in audit work for aerospace companies in the late-90s, and her expertise with FT-SE 100 and 250 clients later helped propel her to the head of Deloitte’s aerospace and defence industry group.

It was serendipity rather than strategy, but her interest in the sector was also to suit her perfectly for her present leadership role in the Midlands, given that the region is home to one of the world’s largest aerospace clusters.

“I led our team from 2009 to 2013, often in close collaboration with our colleagues in the US,” recalls Pauline. “Aerospace is a very sophisticated and complex sector, which makes it interesting at so many levels.

“You’ve got the global OEMs, such as RollsRoyce and BAE Systems, then their huge

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TALENT RELIES ON FLEXIBILITY AND AGILITY Ian Halstead catches up with Pauline Biddle, Deloitte’s new practice senior partner in the Midlands supply chains, and also the heritage aspect, which we saw highlighted recently with the 70th anniversary of VE-Day. “The scale and importance of aerospace means there’s always a political backdrop, whether it’s in the commercial or military sectors, so it’ll be interesting to see if there’s another Strategic Defence Review now

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Michael Fallon is back at the MoD.” It’s a little unfair to ask Pauline to select just one highlight from her time in aerospace, but she cites helping to advise VT Group before it accepted Babcock International’s £1.3 billion offer in 2010.

“It’s been intriguing to see many UK-based clients adopting ‘buy and build’ strategies in

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the US, so it’ll be interesting to see how they progress. I suspect we’ll also see the trend for diversification continue, as companies from an aerospace background look to different sectors, such as cyber-security,” she says.

“I still enjoy going to Farnborough, just to look at the scale and capabilities of our aerospace industry. I don’t think we always appreciate the wealth and employment it generates for our economy, or that it really is a world leader in advanced engineering.”

Pauline may have stepped down from aerospace and defence industry work, but she remains embroiled in M&A activity.

Over the last year, she’s led the Deloitte team on more than 20 high-profile deals, including Mercia Technologies’ move to AIM, the acquisition of Norwich Airport by Sir Peter Rigby’s corporate vehicle, and Lloyds Development Capital’s (LDC) £30m purchase of Prism Medical. Her most recent involvement in such activity was the complex deal which saw LDC pay a shade over £300m to acquire NEC Group from Birmingham City Council.

Her expertise has spanned three of Deloitte’s four core activities, audit, consulting and corporate finance, but the NEC deal also embraced the firm’s tax, business modelling and real estate teams.

“It was a flagship deal for the region, and very enjoyable to assist LDC on such a major acquisition,” says Pauline. “Many of the private equity players have become more London-centric in recent years, but LDC has never diluted its regional focus.

“It was also good to see Deloitte Real Estate playing a major role, looking at the different property assets of the NEC Group, such as the NIA and the Genting Arena.

“When Deloitte bought Drivers Jonas just over four years ago, the timing did seem unusual given the strength of the market, but we are now seeing the logic for that deal, and at an operational level, the synergies are evident.”

Given Pauline’s experience in the international M&A arena, it’s intriguing to hear her take on how such activity might look for UK corporates in the months ahead, now the political landscape has changed so unexpectedly.

LEGAL AND FINANCE QUARTER

“We’ll certainly see companies still looking to invest overseas, although given the current economic and political challenges of such countries as China, Russia and Brazil, you’d expect to see deals taking place in stronger environments,” she says.

“The political risk for business has been reduced by the election outcome, but not eliminated, even though it is positive to see a pro-business government returned to power.

“We carry out a quarterly survey of chief financial officers, and in Q1 2014, their major concern was the independence referendum in Scotland. This year, it was how the EU referendum will play out, and both those issues remain unresolved.”

Of course, as throughout the professional services sector, there are ever-present

It’s a powerful feeling when people look to you as a role model challenges concerning both the recruitment and retention of talent, and the presence and promotion of female employees.

Pauline isn’t the first female senior figure in a Big Four practice in Birmingham, with Jane Lodge as one of her recent predecessors, and Sara Fowler holding a similar position at EY, but she’s still in the minority.

“I don’t like quotas, and you should always be the right person regardless of your sex, but equally, I do think it’s important for us, and our clients, that we have a leadership team which is relevant to the markets we serve,” she says.

“Some countries, particularly the US, have a higher representation of females at CEO level, and different countries also have different perceptions about diversity.

“Even in the 22 years since I graduated, the pace of change has been slower than I thought likely. I’d expected to see more

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INTERVIEW

females in the boardrooms of FT-SE 100 companies.

“But I’ve been gratified and proud at the number of female colleagues who have sought me out to discuss how they might realise their full potential. It’s a powerful feeling when people look to you as a role model, and an honour for me to be in such a position.”

Her career within Deloitte saw Pauline spend time in London, Bristol and Reading, before heading to Melbourne and California, so as a newcomer to the Midlands, has she found perceptions matching reality?

“I knew about aerospace and other corporate brands, so I was aware of the presence of JLR, Rolls-Royce, Experian, GKN, IMI and the other blue-chips, but hadn’t realised Birmingham had such vibrancy,” she admits.

“I used to come here shopping with my parents, when I was growing up in South Wales, but the city is absolutely unrecognisable now. I’ve seen how successful Deutsche Bank’s move here has been, and HSBC’s relocation underlines how positively Birmingham is regarded by those outside the region.”

Just as the city has been transformed in recent years, how does Pauline expect the future Deloitte to evolve its presence?

“In terms of location, I’m sure our major footprint will continue to be in the centre of cities where we choose to be, because we’re focused on team-working and people from different disciplines need to come together,” she says.

“As to our structure at a national level, I think we’ll see more people coming out of London and working from the regions. It has to be about recruiting and keeping the best talent, so if people would rather live in Birmingham or elsewhere, we will endeavour to make that possible. Flexibility and agility will remain key elements of the firm’s talent agenda.

“In terms of how we operate, then data analytics and the most efficient use of ‘big data’ will definitely play an increasingly critical role, and technology will have a major impact on how we work day-to-day, and I anticipate that this will be much more transformational in the future than it has been to date.” n

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LEGAL UPDATE

SUMMER 15

A LAW IN ITS INFANCY A number of employment law changes that will impact on UK businesses came into force in 2015. Fergal Dowling, partner at the Birmingham office of law firm Irwin Mitchell, highlights one of the most significant ones – shared parental leave One of the most high profile changes recently has been the introduction of shared parental leave. From April, new parents and adopters have an opportunity to share up to 52 weeks’ leave between them and up to 37 weeks’ pay, in a way which best suits their families, via a new right called shared parental leave (ShPL) and shared parental pay (ShPP).

Eligible parents will be able to take time off together to care for their child, transfer leave to their partner, and return to work in between leave periods during the child’s first year. The scheme potentially offers parents a huge amount of flexibility, but to achieve this, the rules are highly complex.

Parents do not have to take ShPL – it is entirely optional and those who do not ‘opt in’ will still benefit from existing family friendly rights such as maternity, adoption and paternity leave.

Employees do not have to make a decision about whether they wish to take ShPL before their baby is born or their adoption takes effect.

Instead, they can start maternity or adoption leave and then decide to convert any remaining leave to ShPL at a later date.

ShPL is only available to eligible parents whose babies were due on or after 5 April 2015, or to adoptive parents who have a child placed with them on or after this date.

Only employees can apply for ShPL and it is not available to agency workers or to those who are self-employed.

To qualify, employees must have been continuously employed for at least 26 weeks before the 15th week before the baby is due and must remain so.

The co-parent must also be ‘economically active’, which means that they must have

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worked (although not necessarily as an employee – agency staff may also qualify), and earned a minimum amount over a qualifying period.

So, if the employee is the sole bread winner, he/she will not be eligible for ShPL.

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Employees may also be eligible to receive Shared Parental Pay (ShPP) for up to 37 weeks provided there is some remaining statutory maternity or adoption pay that would otherwise be available which can, subject to certain rules, be transferred to the other

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parent or utilised by the primary carer.

ShPP is paid at a flat rate (currently £138.18 per week).

POPULARITY There has been much discussion and speculation in terms of how popular ShPL will be. Each year 285,000 working couples are expected to be eligible. However, the Government predicts that just 5,700 couples will take advantage in the first year.

At Irwin Mitchell, we think demand might be higher. Indeed our survey revealed that a third of men thought ShPL would be the most sensible option for their family as their wife or girlfriend earns more than them. Nine out of 10 couples where the woman is the main breadwinner said that they worry how they would cope financially if the mother were to take their full maternity leave. Sixty-one per cent of men claim they would be happy to become a stay-at-home dad, even if it had a detrimental effect on their career in the future.

NOTIFICATION REQUIREMENTS So how should an employee approach their employer about this? Well, an eligible mother who wants to take ShPL, or enable her eligible partner to take it, must first end her maternity or adoption leave.

She can do this by returning to work before the end of her maternity leave period, or by giving notice that she intends to end it at a future date.

Employees must give their employers at least eight weeks’ written notice of the date they wish to take leave and this must be signed by the eligible co-parent.

Employees who ask to take a single block of leave are entitled to take it. However, if an employee asks in a single notice to take leave in different blocks, her employer does not have to agree to it.

Instead, it has two weeks to discuss the pattern of leave and suggest alternatives.

If the request is refused, the employee has the right to take the amount of leave as a continuous period.

Whilst employers can reject requests for discontinuous leave without giving a reason, we believe that it would be unwise to do so as employees have the right to withdraw and

LEGAL AND FINANCE QUARTER

LEGAL UPDATE

resubmit their request, and there is no limit on how many times they do so.

More importantly, employers that reject requests for discontinuous leave face the prospect of grievances and allegations of discrimination, particularly from male employees who may argue that female employees are more likely to have requests for discontinuous leave approved.

Employers need to be ready to assess requests for discontinuous leave consistently, irrespective of gender and by reference to fair and well-documented business reasons.

TOP TIPS To assist businesses with ShPL, Irwin Mitchell has produced the following top tips to help businesses deal effectively with the legislation; • Do not underestimate the popularity of Shared Parental Leave – according to our recent survey, more than a third of men say that being a stay at home dad would be the best financial option for their family.

• Don’t leave it to the last minute – employers should put in place appropriate policies and procedures as soon as possible.

• Consider requests for discontinuous leave by reference to fair well-documented business reasons.

• Conduct an impact assessment of the new rules after six and 12 months. This assessment will help identify uptake and can form the basis of any decision taken on whether to offer enhanced shared parental pay or not.

• Make sure that requests are dealt with in a sensitive (and non-discriminatory) manner.

HOLIDAY PAY The other key issue concerns holiday pay and in particular, how much workers are entitled to be paid when taking annual leave if the

individual earns overtime or commission.

Last year, the Employment Appeal Tribunal found that workers who regularly worked contractual overtime and received taxable allowances linked to their work were entitled to have these payments included in their holiday pay and that it is unlawful for employers to only pay holiday at a basic rate.

In addition, the European Court of Justice (ECJ) found that a worker whose salary included regular large commission payments should be compensated when taking holiday because he was not able to earn commission.

This high profile Lock v British Gas case was also heard at an Employment Tribunal on 4 February 2015 after the ECJ ruling last year.

In the case of Mr Lock, the ECJ ruled he was disadvantaged by the fact he couldn’t earn commission whilst on holiday and therefore this had an impact on his earnings in the following month.

In a judgment handed down in March, the Employment Tribunal has now determined that the UK’s Working Time Regulations can be interpreted in line with the European ruling.

Now that it has cleared that ‘hurdle’, we believe it could change the way that companies pay some commission in the future and believe it could potentially open the floodgates for back pay from employees who have similar commission arrangements and believe they have been disadvantaged.

These decisions are significant and suggest that many employers and agencies have been underpaying holiday for the last 16 years.

Although they are subject to certain limitations, businesses should certainly review the holiday pay calculations of their employees and agency staff they are responsible to pay, to ensure that they comply with these rulings and include all necessary payments. n

Sixty-one per cent of men claim they would be happy to become a stay-athome dad, even if it had a detrimental effect on their career in the future

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BUSINESS QUARTER | SUMMER 15

AS I SEE IT

SUMMER 15

IT’S TIME TO TAKE A GLOBAL OUTLOOK After a positive 2014 and first quarter, small and medium enterprises should make further gains in the rest of 2015. Top regional accountant Ian Holder believes they will Recent figures on SME growth have been highly encouraging given that it is outside of the EU and US – has slowed, but has settled start-ups and small businesses which employ the vast majority of the at a more sustainable level, with an annual growth target UK’s workforce. of 7%.

StartUp Britain, based on analysis of data at Companies House, revealed The Chinese own Coventry-based black cab maker London Taxi that 18,337 new businesses were registered in Birmingham in 2014, Company, Covpress and MG, yet the West Midlands’ the highest of any UK city outside of London and an increase of export surplus with China stood at an incredible £2.76bn last year.

2,000 on the year before.

So Government encouragement for SMEs to dip their toes into A cautionary note though – while there are around 400,000 new exporting, particularly to China, is beginning to bear fruit. Statistics business start-ups in the UK annually, one-third cease trading show that businesses are 11% more likely to survive if they do export. within three years.

Traditional reluctance often surrounds a lack of knowledge and a fear of In today’s global trading environment there’s no escaping the taking risks in unfamiliar territories. But help is available via international ups and downs of the world economy – even for SMEs. accountants like ourselves, UK Trade & Investment and Chambers of The volatility in 2014 was the result of a broad range of Commerce. And as long as the value of the pound stays within events such as Russia’s annexation of Crimea, the Ebola acceptable boundaries, exporting remains attractive. Indeed, in 2014 crisis, the end of quantitative easing in the US and political the West Midlands had lots to be proud of, with exports up 11% at uncertainty across Europe. In particular, elements like the £28.4 billion, the UK’s largest increase, making the region the third Crimea and Ebola, which no-one predicted, can be the biggest exporter. Much of that is, of course, down to the incredible success of most dangerous for sapping confidence, as business Jaguar Land Rover and a strong car sector generally. hates uncertainty. I’m sure that as 2015 marches on, The JLR story continues to be amazing – a sales boom, thousands of new we’ll face concerns that are not on anyone’s radar jobs, huge investment, quality cars people want to buy and a packed new right now. model pipeline.

What we do know is that fears have re-surfaced UK car sales rose 9.3% in 2014 to reach a ten-year high of 2,476,435 units. over the future of Greece, and that most European And the end of the first quarter of 2015 saw the UK notch its highest economies – the UK’s main target – remain pretty monthly level of new car sales this century. stagnant, so that’s not good for exporters.

All this has seen an order bonanza for local car component suppliers, but Meanwhile, the Chinese economy – the world’s they must keep their focus. Cash flow is vital. It is not a lack of customers or second largest and the UK’s biggest trading partner products that will destroy a business – it’s a lack of cash.

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Statistics show that businesses are 11% more likely to survive if they do export...reluctance surrounds a lack of knowledge and a fear of taking risks

AS I SEE IT

Working capital is so important. Margins in the automotive sector are notoriously thin and lead times can be lengthy. This is where advisers can help – checking contracts, mitigating potential risks.

Two other significant factors for SMEs are skills and the availability of credit. The need to improve skill levels is probably the number one challenge across the West Midlands. All sorts of bodies – the Government, LEPs and companies themselves – are making progress, but it’s far from being solved.

Employers have long complained that it’s difficult to recruit people with the right skills and attitudes to work, hitting their ability to innovate and take advantage of new opportunities.

And with JLR taking on significant numbers of engineering graduates as well as apprentices, it’s harder for second and third tier suppliers to recruit. Credit is the other big issue, but its availability does seem to have improved for those with credible business plans and the security required. While many smaller companies remain wary of relying on bank borrowing and continue to pay down debt, interest rates remain stable, the longest low spell in living memory.

Overall, at the start of 2015, most surveys suggested the UK will expand at a healthy rate somewhere between 2% and 3%. Given the political and economic risks at home and abroad, that would probably represent a good outcome. n Ian Holder is an audit partner based in the Birmingham office of international accountancy firm Mazars, which has over 1,500 partners and staff at 20 officers across the UK. He can be contacted at ian. holder@mazars.co.uk and on 0121 232 9500. n

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BUSINESS QUARTER | SUMMER 15

THE UK’S INTELLECTUAL PROPERTY LEAGUE

IP 10 0

THE IP100 - RECOGNISING THE VALUE OF IP IN YOUR BUSINESS BQ Magazine is delighted to announce the launch of the Intellectual Property (“IP”) League Table and the IP100, compiled in association with Metis Partners, an award-winning IP solutions firm The IP League Table will profile and rank innovative companies within the UK’s private sector, highlighting those businesses which have significantly invested in their IP in the form of IP creation, IP management policies, R&D activities and IP commercialisation. The top-scoring companies will be published in the IP100, an annual ranking of companies that are considered to be the most effective at commercialising their IP assets. The ranking process involves an assessment of IP-specific data linked to the following IP asset classes: brands, software, patents, trade secrets and critical databases. A proprietary scorecard will be applied to calculate an IP score, and the IP100 team will rank companies based on the results.

The IP League Table will give companies the platform to get recognition for the value of their IP, whether using IP to: • Boost the exit valuation of a business • Improve access to new markets • Protect existing market share • Create new barriers to entry IP also has the ability to play an important role in transforming funding options available to businesses. The IP League Table will enable companies to showcase their investment in intellectual property and potentially leverage the associated value to raise finance and restructure debt.The IP League Table is open to all UK companies and is FREE TO ENTER.

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COMPANY PROFILE COMPANY PROFILE SUMMER 15 15 SUMMER

Businesses refocus as election delivers greater certainty With the General Election now over, businesses will be refocusing upon their strategies. Jackie Hendley, Head of Office at Smith Cooper in Birmingham looks at some of the tax promises made by the Government during their General Election campaign “General Elections create uncertainty and with one as unpredictable as that which took place in May this year, there was little wonder that an impact was felt across the business world.

“Now, post Election and with a majority Government in place (albeit a small overall majority), many businesses across the region will be refocusing their attentions on their growth strategies.

“One of the reasons why businesses slow or halt activity during the run up to a General Election is due to the uncertainty over the future tax environment. Often parties can vary significantly on their taxation policies and this Election was no different.

“So, with the Election now over, what do we know about the potential tax environment under a majority Conservative Government?

“During the General Election campaign the Conservative Government said that “working people in this country have paid enough tax” and so, the party would focus on other ways of clearing the deficit. These included spending cuts, the reduction of Government waste, reducing the welfare bill and continuing to clamp down on tax avoidance.

“They also went on to pledge there would be no rise in VAT during their five-year term in office.

“Businesses would also have been relieved to hear that the Conservative Government will freeze

Jackie Hendley, Head of Office at Smith Cooper in Birmingham

the rate of National Insurance Contributions for the duration of their five year term as well as maintaining the abolition of employers’ National Insurance Contributions for those under the age of 21 and next year for apprentices under 25.

“All of this was supported with a pledge to provide UK businesses with the most competitive taxes of any major economy.

“Their proposition is that the Government will be focused on providing the right environment for businesses to thrive and this must also include those entrepreneurs looking to take the leap and start up in business on their own. The

As the Conservative Party starts their new five-year term of office, the eyes of the business community will be upon them

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Conservative Party was keen to highlight their support for business start-ups, stating they would triple the number of such loans to 75,000. As anyone starting a business will know, funding can often prove a difficult road to travel.

“As the Conservative Party starts their new five-year term of office, the eyes of the business community will be upon them. From the EU referendum to the delivery of their manifesto for all sizes of business, owner managers and business leaders will be looking to their Government to help create a thriving economy that is not stifled by red tape.

“David Cameron stated he wanted to make Britain the best place in the world to start a business.

Here in the Midlands we are home to a wealth of innovative and entrepreneurial businesses and individuals. Only time will tell if the Government is able to create the right environment to help these businesses thrive.”

Over the past 30 years, Smith Cooper has become one of the largest independently owned accountancy and business advisory firms for owner managed businesses across the Midlands.

Smith Cooper provide a wide range of specialist services to both corporate and individual clients, including accounting, taxation, corporate finance and a range of IT services. To find out more contact Jackie Hendley on 0121 236 6789.

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DELIVERING C E R TA I N T Y TO BUSINESSES IN 2015

JACOPA LIMITED Wastewater Services ASSET BASED LENDING – MANAGEMENT BUY OUT Undisclosed

MEDICA PACKAGING Manufacturer & Distributor ASSET BASED LENDING – PE BACKED ACQUISITION £3,700,000

“We developed a good rapport with the Business

“I could tell from the first meeting that Shawbrook Business

Development Director and our confidence in Shawbrook

Credit got it and they delivered exactly as they said they

extended through their detailed evaluation of our business

would, thankfully without even a single wobble along the

plan and the meetings at our offices with their Senior Client

way which would have lost me some sleep! Traditionally

Manager. In the final negotiation stage of the deal with the

you would always have at least one back-up finance

Seller, the team at Shawbrook Business Credit was always on

house, however in this case, the benefit from working with

hand to assist in working out final points of detail, enabling us

Shawbrook Business Credit exclusively in terms of expediting

to meet the tight timescales in which to complete the buyout.”

and therefore securing the transaction was enormous.”

Alex Lloyd, Managing Director of Jacopa Limited

Layton Tamberlin, Sullivan Street Partners

T A L K T O U S T O D AY

T 0121 262 4029 | 07703 107488 paul.edmeades@shawbrook.co.uk WWW.SHAWBROOKBUSINESSCREDIT.CO.UK

T H I S A D V E RT I S E M E N T I S I N T E N D E D F O R I N T E R M E D I A R Y U S E O N LY A N D M U S T N O T B E D I S T R I B U T E D TO P O T E N T I A L C L I E N T S .

SUMMER 15

ASSET BASED FINANCE

ASSET BASED FINANCE: INTO THE MAINSTREAM?

Jeff Longhurst, Chief Executive Officer of the Asset Based Finance Association (ABFA) which represents the invoice finance and asset based lending industry in the United Kingdom and the Republic of Ireland With the economic recovery prompting some revival in business optimism, now is the right time for businesses to consider what options are available to them to fund investment and growth. That’s leading more of them than ever before to use asset based finance. At any one time, ABFA Members are now advancing almost £20 billion in funding to businesses across the UK and Ireland, supporting clients with a combined turnover of almost £300 billion in 2014. Invoice finance and wider asset based lending have long been seen as a key alternative to ‘conventional’ sources of finance such as overdraft and term loans. However the changes in the business finance landscape in recent years have meant that asset based finance is no longer just an alternative. It’s now firmly in the mainstream, as a core part of the funding suite for businesses of all sizes.

But what factors have driven this move into the mainstream?

Firstly, the speed and flexibility with which an ABFA Member can provide funding mean that businesses can get their growth plans off the drawing board and into reality more quickly than they could with a traditional lending product.

Asset based finance providers are able to ‘look through’ the business to the strength of the client’s underlying assets – in particular to its debtor book, as represented by its invoices.

By looking at a client’s true strengths, rather than being solely reliant on often out-of-date financial indicators contained in the accounts, for instance, an asset based financier will often be able to provide more funding more quickly.

The industry has evolved to provide funding against a wider range of assets beyond the

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Asset based finance providers ‘look through’ the business to the strength of the client’s assets invoices (factoring and invoice discounting – referred to collectively as invoice finance) that marked the industry’s origins. Wider asset based lending packages now make up around 20% of the total funding provided

by ABFA Members. Through asset based lending, funding can be provided against a

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range of other assets, including stock, plant & machinery, property and also intangibles such as IP and forward income streams.

Another advantage of asset based finance that has come to the fore in recent years is its scalability. The funding available through asset based finance grows as the client grows and this can free up senior management to focus on building the business rather than spending time worrying about securing additional funding as the business evolves.

Asset based finance can also help businesses deal with ever-increasing payment terms from large customers. Long waits for payment, which have become increasingly common in recent years, can quickly impact on a company’s cash flow and its ability to take advantage of opportunities. Invoice financing offers a cost-effective solution as it enables companies to free up their finances in order to cover fluctuations in cash flow and deploy funds at short notice.

In addition, invoice financiers are often able to provide a range of additional services to their clients, including collections, credit control and sales ledger management (in factoring).

This can be particularly helpful for smaller businesses, effectively allowing them to outsource their credit control to specialists and focus on growing their business. In addition, both factoring and invoice discounting can be provided with bad debt protection on a ‘nonrecourse’ basis, whereby the finance provider takes on the risk of non-payment.

For growing businesses looking to find funding to make the most of their opportunities, asset based finance is now a key option within the funding toolkit. n

BUSINESS QUARTER | SUMMER 15

INVOICE FINANCE // STOCK // P&M // TRADE // PROPERTY // TERM LOANS

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High precision coatings manufacturer required flexible funding to support growth plans

Leumi ABL provided

Leumi ABL provided

£8.5m ABL facility including CID, stock, loan + trade finance

Structured multi million £ CID + P&M facility

To find out more about the Leumi ABL approach to business call Jason Holland on 07824 486820 or email jholland@leumiabl.co.uk or visit www.leumiabl.co.uk Brighton ■ London ■ Birmingham ■ Leeds ■ Manchester ■ Reading ABL MULTI FINANCIAL AWARD WINNERS 2014 -2015

SUMMER 15

ASSET BASED FINANCE

INFORMATION IS THE KEY TO GETTING THE RIGHT FUNDING TO SMEs Jeff Longhurst explains why the ABFA believes that for SMEs seeking funding to drive their growth, knowledge is power At the ABFA, we believe that for SMEs seeking funding to drive their growth, knowledge is power. That is why we are fully behind two significant initiatives that came out over the last 12 months – the consultation on helping to match SMEs rejected for finance with alternative lenders, and the Business Finance Guide. The Association strongly supports the initiative to have banks that turn down SMEs for loans pass their details on to ‘alternative’

providers of finance who may be able to provide funding that is more suitable for their business. The commercial finance world is evolving; as well as asset based finance, technology is facilitating the development of a wide range of new funding products beyond the ‘traditional’ sources of funding. Providing SMEs with better information about the finance options that may be appropriate for their businesses is crucial for this.

The Business Finance Guide, produced by the British Business Bank and the ICAEW Corporate Finance Faculty, is an excellent initiative to raise awareness of the financing options available to businesses. Covering a huge range of funding choices, the Guide is an invaluable aid to SMEs in deciding which form of funding best suits their particular needs.

The more businesses know about the varieties of finance on offer, the better-positioned they are to find the blend that suits them.

We hope to see the new Government continue with the commitment to moving the ‘alternative’ into the mainstream, getting even more funding to the UK’s vital SME community. n

Transactions structured to succeed Whether you are seeking to finance mergers and acquisitions, MBOs, MBIs or restructures, Hampshire Trust Bank’s Commercial Finance team is focussed on your objectives. We provide flexible asset-based lending and structured finance facilities dedicated to helping you realise your ambitions.

Here are just three of the tailored asset-based lending transactions we have delivered recently for UK businesses.

Trueform Engineering Ltd

MCS Control Systems Ltd & EMR (Brackley) Ltd

Agilitas IT Solutions Limited

£3.7m

£1.5m

£2.5m

Passenger Transport Engineering Solutions

Manufacturers of Electronic Control Systems

Inventory Management and Technology Services Provider

Our focus is your success Contact us on 07920 492026 or email rob.gilmore@htb.co.uk.

www.htb.co.uk Hampshire Trust Bank is the trading name of Hampshire Trust Bank Plc registered in England and Wales under number 1311315 (Registered Office: 131 Finsbury Pavement, London EC2A 1NT). Authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority – Financial Services Register Number: 204601.

DONE DEAL At PNC Business Credit, ‘Done Deal’ is more than a tag line. It defines our business.

Widely regarded as the UK Asset Based Lender of choice by the Private Equity community, advisors and companies alike, we provide funding for mid-market companies that delivers detailed understanding and flexibility, combined with unparalleled access to our senior team.

DONE DEAL

DONE DEAL

DONE DEAL

£45,000,000

£9,000,000

£40,000,000

Asset Based Lending

Asset Based Lending

Asset Based Lending

Steel Stockholders

Fine Jewellery

Automotive Components & Distributors

DONE DEAL

DONE DEAL

£40,000,000

£9,500,000

£25,400,000

Asset Based Lending

Asset Based Lending

Asset Based Lending

Chilled Savoury Food Manufacturing

Powdered Drinks & Desserts

Steel Stockholders

DONE DEAL

Do you have a deal that needs to get done? peter.whatson@pnc.com +44 (0)121 262 4055 | +44 (0)7796 173462 PNC Bank is a registered mark of The PNC Financial Services Group, Inc. (“PNC”). Asset–based lending is provided by PNC Business Credit, a division of PNC Bank and PNC Financial Services UK Ltd. (an indirect wholly owned subsidiary of PNC Bank,) in the United Kingdom. Lending and leasing products and services, as well as certain other banking products and services, require credit approval. ©2015 The PNC Financial Services Group, Inc. All rights reserved.