Lloyds TSB Commercial Finance: A Growing Appetite for ABL - Martin Cooper
With liquidity scarce, companies must be creative with funding but keep risk under control. As a result, many are turning to a revived asset-based lending market, Martin Cooper of Lloyds TSB Commercial Finance tells FDE.
Where working capital was once easy to find, now there is a squeeze on liquidity in the world’s financial markets. While corporates and financial institutions rethink their attitude to risk, enterprises are still thirsty for funds. Asset-based lending (ABL) may well fulfil some of their needs.
ABL is a dynamic source of funding, where finance is secured against a range of corporate assets, including invoices, stock and manufacturing equipment. Having developed from its previous incarnation as factoring, which became unfashionable, it has reinvented itself in a form that could benefit many enterprises in today’s tight credit markets.
‘Steadily, over the last three years there has been more acceptance of ABL among large businesses, largely because the stigma of factoring has gone. It is now seen as a genuine form of finance. Major corporates are seeing the benefits of facilities designed to match a company’s assets,’ says Martin Cooper, director of large and major corporates for Lloyds TSB Commercial Finance.
ABL is core to the services of Lloyds TSB’s commercial finance team, which also helps companies to improve their cashflow through factoring, invoice discounting, hire purchase and leasing finance. Cooper himself sees at first hand how leading businesses in the UK and around the world are changing their attitude towards ABL.
‘ABL underpins good discipline in business. It forces companies to focus on working capital, so they start looking at issues such as how quickly their sales come in. Management needs to hone in on those things that maximise working capital. In hard economic times, companies need to have these kinds of management practices,’ he notes.
Flexible finance
He also points out that ABL incorporates a degree of flexibility that is especially important in today’s unpredictable, dynamic and often volatile markets. If a company faces a sharp drop off in turnover, which affects its short-term cash position, Cooper and his team believe that providers of finance must look to support their clients.
Finance could be forwarded against a different type of asset, for instance, so with a fall off in sales they might look to lend against stock or unencumbered assets such as plant and machinery.
‘Companies want certainty of finance. They need to know not only how we derive sales and available funds, but to be able to trust our ability to deliver that funding. We always build in good levels of headroom, because we know that markets can change,’ says Cooper.
Finance partners for the future
A growing number of financial institutions are looking to provide ABL services, but Lloyds TSB’s ability to deliver on its commitments sets it apart from the crowd. As well as having a reputation for integrity, the bank has the scale and stability to underpin its services. It remains one of the few major clearing banks to offer ABL facilities.
It is important that potential borrowers take such factors into account, as ABL involves, according to Cooper, a symbiotic relationship with each client. Such close relationships will be increasingly important as ABL in Europe follows ever faster in the footsteps of the US.
‘ABL in the UK looks to the US market, where it first came up as a form of finance 30 years ago, though it was then mainly focused on low-rate funding for SMEs. It is now spreading across Europe and following the same pattern,’ notes Cooper.
‘Now, we understand assets better and we can provide additional services, so ABL is good at providing certainty of funding. When the economy was burgeoning and funding was available, people took the easiest way. ABL will now have a bigger role in the current climate, so I am very optimistic about the market’s future.’
