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In Focus Commercial Credit


Asset-based endeavour


The asset-based lending market is enjoying a period of growth and a widening of appeal


Steven Chait Managing director and head of EMEA, Wells Fargo Capital Finance


Over the last decade, the asset-base lending ABL sector has shifted from the sidelines of traditional financing to the mainstream. It has become viewed as an attractive alternative for asset-rich companies looking to maximise their borrowing capacity. Moreover, during the financial crisis and


to-date, we have supported a plethora of mid- sized businesses to large corporates, as well as private-equity owned businesses, looking to maximise their assets via our ABL offering.


Growing popularity Although more established in the USA, ABL is growing in popularity in Europe. Working as a partner with many companies, our ABL offering is a viable option for regular cashflow-based high-street lending, and we have seen an uptick in the number of firms selecting this type of financing to support their companies – with deal volumes up 14% year on year. Through the specialised monitoring of


credit and collateral, our ABL offering enables us to underwrite loans that are outside the typical lending criteria of most traditional financing relationships — which facilitates greater credit and more flexibility to help customers succeed financially.


Passing a milestone In October 2016, the Asset Based Finance Association reported that the amount of invoice finance secured by UK businesses had risen by over a quarter in the last five years. In addition, the total amount of UK lending secured through invoice financing reached a record and passed the £20bn milestone, which is an achievement. At Wells Fargo, during the months of


October and November, across the UK, we completed a record seven transactions


18


The total amount of UK lending secured through invoice financing reached a record and passed the £20bn milestone, which is an achievement


assets allowed them to unlock additional liquidity that may not have been available. Other factors influencing the popularity of


ABL include that fact that it provides greater flexibility to companies to fund acquisitions, recapitalisations or working-capital needs. For example, unlike a traditional bank credit facility, an ABL financing arrangement is a secured loan that does not bind companies


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of execution. All of these factors are creating traction within the financial-services marketplace as ABL becomes more utilised as a mainstream funding tool.


Conclusion Although there is a lot of uncertainty in the UK market with Brexit, the continuation of low interest rates, which is encouraging for borrowers, could be seen as an opportunity for corporates exploring alternative financing tools, such as ABL. We have a healthy pipeline and balance


sheet, and are working closely with our customers, alongside their sponsors and debt advisors. We have a wide range of capabilities


to provide bespoke facilities during these uncertain times. CCR


January 2017


for a range of retail, manufacturing and infrastructure companies, and our loan commitments for the UK and continental Europe as of October exceeded $3bn. Utilising our balance sheet, these firms


selected ABL as their preferred financing option as borrowing against their company’s


to covenants or restrictions. In addition, over the last few years, there has been greater acceptance from knowledge-based professionals on the variety of products. We have noticed that more SMEs, private- equity houses and large corporate advisers are discovering our capabilities and speed


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