Robin Hood Finance Limited

corporates

Corporates need funding. And banks are not lending as they once were. Many firms have reported a “crowding out” effect where banks lend to bigger firms, whilst smaller ones really suffer the squeeze. Three key approaches are trade receivables (book debtors) securitisation; supplier or supply chain financing; and extended credit.

Trade receivables

  • Securitisation of trade receivables is still being done by several banks. It can give medium-sized firms access to the (rated) capital markets without them having to be rated themselves [Article “Beat the Liquidity Crunch”]
  • The trade receivables securitisation market in Europe is over USD40bn equivalent, and rated deals have been done down to EUR3m in size.
  • This can be a valuable alternative source of liquidity for corporates.

Supplier financing

  • This is where the credit of the buyer is used to raise funding for the seller.
  • A medium-sized seller often has receivables due from one or more strong companies, which it is funding with expensive and scarce bank lines. So it has a high-quality asset (the receivable from the strong company) which it is funding at overdraft rates
  • .

Supplier financing closes the circle by raising money against the stronger buyer’s credit


     

Extended credit

  • In some cases it is possible to grant the buyer extended credit, e.g. 120 days, and pay the supplier up front. The buyer gets more days’ credit, which finances his working capital. This can be inexpensive overall since the seller usually gives a discount for cash settlement.
  • Why does the seller do this? Even in boom times, sellers offer a discount for early settlement, since sellers prefer having cash up front rather than funding debtors with expensive and scarce bank lines, and having to spend time chasing payments. All parties benefit-except of course the banks!

RHF is there to

  • Help work out what can be done, and the best way to do it (feasibility)
  • Prepare the customer for the due diligence process, including rating when appropriate
  • Identify the best arranger and negotiate the best deal
  • Help to see the deal through to completion as quickly and efficiently as possible.