Funding for acquisitions and new business origination

The UK SME and Consumer lending space is benefitting right now from new wholesale funding from a range of private equity investors and banks, all seeking a stake in this highly prized slice of the lending market.

The benefits of receiving low cost, big investment lines from new funders, however, don’t come without new challenges.

An investor that’s offering new wholesale limits or committing to an acquisition will do so only with the confidence that the underlying business has a portfolio that’s a) legitimately originated and compliant; and b) can be managed efficiently in-life, with automated and secure billing & collection, satisfactory MI and housed on a scalable operating platform.

The providers of equity and debt to asset and consumer finance lending organisations are concerned about what happens in the case of a major failure that might lead to them taking control of the portfolio underpinning their investment.

A standby servicing arrangement with VLS can mean the difference between success and failure

Speeding up the funding process

Effective and credible Standby or Back-Up Servicer arrangements are a pre-requisite for any independent lender who has ambitions to obtain new wholesale lines or negotiate a trade sale of a successful own-book based business.

Few of the banks and equity investors offering wholesale funding to independent SME and Consumer lenders have the in-life portfolio management, billing and collections capabilities necessary to safeguard their investment should there be a failure by their client or the acquired business.

It means that they’ll require pre-planned access to a third party specialist, instantly capable of stepping in to take over all in-life management processes. That’s precisely where a standby (or back-up services) specialist acts as the catalyst for funding and acquisitions. The back up servicer takes on responsibility for timely billing, secure collection and the distilling of accurately consolidated portfolio information – all vital accounting and risk management functions that preserve value in the book that’s been funded.

In 2016/17 VLS has delivered vital back-up service ingredients that ensured deals to acquire a UK broker/lender and a major UK lease co respectively, could be closed and funded. The deals involved over £350m of equity and new wholesale funding.

Without VLS’s back-up service arrangement, there would have been no acquisition or approval of the funding lines

The role of the specialist back-up services provider

VLS has managed the quick and accurate migration of third party portfolios many times since launching this service in 2010. VLS is accustomed to the process, its challenges and the sensitivities required – even when data quality is less than perfect or incomplete.

Standby for action? The action starts much sooner than you might think. VLS has a menu of Standby solutions, varying from a synchronized system mirroring full live details of the book, (a ‘Hot’ standby), through to a contingent data storage, with data refreshed monthly (the ‘Cold’ alternative).

Essentially the differences are in the level of monitoring required and the speed at which step-in can be achieved. For example, a ‘hot’ arrangement can transfer control fully in the space of a week – a valuable reassurance where a multi-million pound investment might otherwise be threatened with impairment.

 

A Trusted Business Partner

VLS has the real and proven ability to step in when needed and run all the processes that support a successful instalment lending business – from customer onboarding, in-life functions, right through to end-of-term asset management. That’s what sets VLS apart.

We’ll be happy to walk you through the ways we could assist, sharing with you our specialist experience and techniques for vital pre-Standby analysis. It’s based on experience and a real sense of partnership that underpins all that we do.