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Non- Traditional Lending

By January 22, 2020 No Comments

There are many reasons why organisations may choose to lease equipment rather than purchasing outright (using capex).

One of the key reasons is to open up funder diversification (funding flexibility) and simplify the lending process. This blog discusses ways that businesses can tackle their finance needs beyond just a traditional bank lending model.

Banks will typically assess finance factoring  in three key areas: aggregation; security; and lending approach.

fabian-blank-pElSkGRA2NU-unsplash-1Traditional banks will ‘aggregate’ all facilities that they provide across the borrowing company, hence associated companies and respective Directors will generally only be lent up to a certain percentage of the Market Value of the assets they hold. This aggregation can present a hindrance if the bank has reached their exposure level with the company.

Splitting banking facilities between core transactional banking and non core banking products (such as equipment or asset finance) allows companies to firstly secure their business critical assets, and secondly keep their transactional banking lines in place for other strategic projects. Furthermore, splitting your risk across multiple funders when new equipment needs arise can provide flexibility and diversification.

In regards to security, a bank will typically take a GSA (General Security Agreement) over the assets of the company. A GSA is a powerful document that holds security over All Present and after-acquired Property (All PaaPs)  of the company. In short, this means that the bank has a security entitlement over everything the company owns currently and into the future.

By contrast, leasing companies just take a PPSR security interest on the specific assets funded, ensuring you don’t have the belts and braces hold of an All PaaPs charge.

Lending approach is around the appetites that traditional lenders will have around clients. They have complex systems and processes that the client must comply with. In addition, as bank regulations and appetites change, the access to this funding may become very complex or dry up completely.

When companies choose to use a specialised equipment finance provider such as Quadrent the process is managed for them. Not all companies fit a perfect lending model and a more flexible and responsive approach is required if the deal is outside the box. Quadrent is a specialist and can make informed, agile decisions.

The recent Banking Royal Commission has exacerbated the challenge of companies accessing finance from the big banks. Companies are now shifting towards third party intermediaries to access finance rather than from the banks directly.*

Having Quadrent manage the lending process means it is fast, light touch and handled by experts who understand how an application needs to work.

Quadrent is able to offer a real alternative to access finance, and a different, simpler, better approach to your equipment needs. Reach out today to start a conversation on how we can help.

 

*https://www.afr.com/companies/financial-services/non-banks-double-business-lending-share-as-majors-slide-20191111-p539g8