Home > Uncategorized > The lenders point of view and why we need to listen

The lenders point of view and why we need to listen

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I was recently put in touch with a contact looking to buy a scaffolding business. He was seeking to raise most of the finance on the balance sheet and need less to say, this was going to be a challenge. A very nice guy but he has to move on

Construction is a very difficult sector and whilst financing the debtors is certainly an option, the number of active lenders in the sector is small (although there is likely to be a surprising addition to the roster soon)

The problem my clients faced is that the debtors will not raise sufficient funds and he was hoping to secure finance on the fixed assets, ie the scaffolding equipment. That’s where the problems start and where also it is important to absorb the lenders reasons for not granting credit.

As  broker, I fight hard for my clients and being from the commercial sector rather than banking, my natural sympathies are with the businesses but both points of view have to be taken

Lenders demand security but the security isn’t just the book value. The recoverability is of upmost importance and a determining factor. Property and debtors are fine but scaffolding poles?

Think this through. Aside from the obvious difficulty of dismantling structures the equipment itself is very movable and not easy to identify. To put it bluntly, in insolvency it tends to “go for a walk”

Simply put it is an understandable non starter for lenders (although there has been an exception at the very high end of the market) but my client has not absorbed the very clear negatives and has virtually no personal security to offer.  He is now approaching other brokers who have laughably given him assurances. He’s wasting his time

 

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