Category: Corporate finance and deal advisory

Further expansion of our Deal Advisory business

By John Lutterloch

13 Jun 2019

Gerald Edelman has expanded its Deal Advisory services to offer Asset Finance and Leasing (AFL) facilities to clients.

GE Asset Finance & Leasing Limited (GEAFL) is headed up by John Lutterloch who joins our group after 40 years in the banking and finance industry.

Around 30% of all UK Capital Expenditure is financed by the AFL community. Even excluding property, aviation and marine, the value of assets financed exceeded £28 billion in 2018. 

Funding Capital Expenditure

Business owners have several options when considering the funding of capital expenditure. Many believe that ‘Cash Is King’ and will purposely hold back cash for other projects.

Interestingly, the Times recently reported that ‘Companies are sitting on record cash balances’ and that private companies, excluding financial institutions, have stored away £173bn since March 2016 and are now sitting on £747bn of cash – a record figure’. 

Many companies have a bank overdraft and use the facility to its full limit to cover the cash flow requirements of their business. However, a number have suffered in recent years when overdrafts have been called in, often without justification other than the banks own liquidity requirements.

The popular and safest solution is to finance the purchase of new (or used) items with third party funders outside of existing banking lines. The agreements are usually set over the useful life of the goods by fixed rate finance agreements, which cannot be called in other than in the event of default.

We often advise our clients to spread their financing requirements across several funders.

Businesses can be caught out when an opportunity arises to buy discounted stock, or even an opportunistic acquisition, only to be turned down by their bankers because their lending limit is full.

Careful consideration therefore is important especially when a business is in growth mode. Consider, for example, a situation where a company secures a new contract that requires an upgrade or replacement of its factory machinery. By using existing cash resources, the company may incur a considerable reduction in cashflow  until the new contract fulfils its income potential – sometimes taking months or years. By financing the machinery over a longer period, and paying by instalments, income and cashflow will exceed expenditure from day one, with a positive result to the bottom line.

Furthermore, companies seeking equity to finance their growth can consider combining the funding structure with a mix of equity and debt, which allows them to achieve their objective with a lower level of equity dilution.

A changing market

The range of funders for AFL has changed over recent years. Once dominated by clearing banks and their subsidiaries, the arena is now serviced by specialist leasing companies, new challenger banks, family offices and crowd funding platforms.

GEAFL has negotiated superior rates with most of the leading Finance Houses for a range of facilities, which include – Commercial Loans, Industrial Hire Purchase, Finance Leasing, Operating Leasing, Loan and Mortgage (suitable for marine and aviation assets) Invoice Discounting and Promissory Note financing, to name but a few.

Assets can include cars, commercial vehicles, factory equipment, IT (including software), marine craft (including superyachts), fixed-wing aircraft and helicopters.

Our Deal Advisory team is on hand to help Gerald Edelman clients on all forms of Asset Finance and Leasing matters. For more information, contact John Lutterloch on 07885 133 958 or at jlutterloch@geraldedelman.com.
 

Back to top

To download this report, please provide the following information.