BusinessCorporate FinanceEmbattled businesses explore loan options

Embattled businesses explore loan options

Businesses turn to asset-based lending as an alternative way to access cash

Asset-based lending is becoming an increasingly popular form of financing, as
businesses look for alternative ways to access cash.

Specialists in asset-based lending, including GE Commercial Finance and
Burdale Financial, securitise debt against physical assets such as machinery.
Large clearing banks do offer forms of asset-based loans, but specialist
asset-based lenders will offer finance to groups that the leading banks would
not.

Burger and frozen food manufacturer Canterbury Foods, which was deep in
administration with little hope of recovery at the start of the year, is one of
the latest companies to use an asset-based loan

The group was unable to agree refinancing terms with its existing bankers,
despite attempts to reduce external debts with the sale of its meat products
division to Tranfield Foods.

The group’s management team eventually formed a buyout vehicle called Medway
Foods, which secured a £7m asset-based loan from GE Commercial to purchase
Canterbury’s frozen pastry division and save 220 jobs.

Harvey Hoogakker, assistant director of debt advisory at Ernst & Young,
said that because asset-based lenders were ‘financial offshoots of big
industrial companies their knowledge of the inherent value of assets was
better’.

Tim Ainsworth, commercial director at GE Commercial, said asset-based lenders
were now syndicating loans to secure even bigger finance deals.

‘The market is growing because of syndicating transactions, particularly for
cross-border, pan-European deals,’ he said.

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