The Process
The funding structures we build usually involve both Banks & Regulated Insurers as transaction counter-parties. Bank funders extend funding to the corporate whilst the insurer provides protection to the funder for the buyer credit risk. This provides an effective guarantee for the banks and reduces their Regulatory Capital cost significantly allowing them to pass this saving on to companies.
The process is similar to a normal funding process except:-
- The process begins with a phone call where potential transaction benefits are outlined to senior corporate financial managers. These estimate both the likely uplift in advance rate & reduction in 'all-in' funding costs.
- A Web conference is scheduled to present the IT Platform capabilities that the client, funder & insurer would share to monitor the ongoing risk profile & trading performance.
- Discussions with the facility structurer would open to formalize a proposal.
- Once a formal proposal has been assessed, the decision whether to proceed can be taken.
- Engagement takes place. Negotiations may then begin with existing & prospective bank funders.
Only once a company decides to engage does this process begin to cost, that is how confident we are.
Average increases in advance rate compared to traditional forms of Asset-Backed Finance are between 10-20 % of the total receivables portfolio- not just the 'eligible' portfolio. For a £25m Trade Receivables portfolio this would equate to an extra £2.5-5m of cash paid to the corporate on the date of transaction closure. Alongside this 'all-in' funding costs would be lower that comparable offers. In the above example, for an unrated company, this would save around £1m+ pa.
