Nucleus: Finance that Fits
To hear about Nucleus’ asset based lending facility, Finance Monthly speaks to Corporate Sales Director Ian Bath, who joined the company in July last year and has been working on developing their mid-market ABL business since then.
What is the Nucleus approach when providing asset based lending (ABL) to companies?
At Nucleus, our approach always starts with getting a good understanding of the business we are dealing with, the people behind it, and what they are looking to achieve. With the benefit of this understanding we can start to tailor a package of facilities that not only covers the anticipated needs, but the inevitable bumps along the road that every business experiences as well.
The Nucleus ABL offering includes not only invoice finance, but extends to stock, plant and machinery, and property as well. We have no hard and fast rules around the mix of assets that comprise the borrowing base, and will often fund assets that others may exclude, making our solutions truly flexible.
A particular specialism within Nucleus is funding contractors who operate within the construction sector.
What are the advantages of asset based lending for companies?
Asset based lending frequently enables companies with a strong asset base to get more leverage out of their Balance Sheet than traditional senior debt can provide. It is particularly appropriate for businesses going through a period of change - when they need to invest in growth. Cases where EBITDA is still modest, but the outlook shows an improving trend would be a good example of this. In these situations, it is difficult for a senior debt provider to get comfortable with lending against next years’ income in the same way as a secured lender can. Additionally, ABL facilities typically have fewer covenants than traditional types of lending, making the availability and predictability of funding more stable in times of uncertainty - as we are experiencing at the moment.
Can you talk us through some of the recent trends that Nucleus has observed in the ABL space?
The number of players operating in the space has increased significantly in recent years. Whilst Nucleus has traditionally focused on SME businesses, we have seen an increasing demand in the Mid-Market, and increased our funding threshold to £50 million in 2017. This is a factor of the so-called Alternative Lenders focusing on smaller opportunities and the American Banks hunting out sizeable cross border deals. Increasingly ABL within the High Street banks is working in conjunction with their leveraged finance teams and the basis on which deals are structured is heavily influenced by them, rather than more traditional ABL values.
We have also seen ABL and Private Equity working much closer together as their understanding of our offering, and the value we can bring to a transaction, has improved.
What are Nucleus’ goals for the future of your ABL practice?
We are committed to continuing our support for businesses in a range of industries and sizes, with our flexible offering of products. In 2017, we doubled the total amount that we have lent to businesses to £700m and this year, our ABL product will continue to play a significant role in Nucleus’ growth plan over the next 12 months and beyond.
CASE STUDY:
Key Stats:
Type: Invoice Finance
Borrowed: £8m
Industry: Manufacturing
EXPERT TOOLING AUTOMOTIVE LTD.
Expert Tooling Automotive Ltd. came to Nucleus because they needed to replace their existing ID facility whilst retaining the same pre-payment and funding limit.
Established in 1972, Expert Tooling Automation Ltd. is a highly respected supplier and manufacturer for the British automotive industry. Expert is the largest Automation System builder in the UK, supplying specialist assembly line components to clients including Jaguar Land Rover, Aston Martin and Nissan.
The business has gone from strength to strength in recent years, increasing turnover by five times in under seven years. Previously funded by a bank, they needed to replace their existing Invoice
Discounting facility when their provider pulled back funding. Although still retaining a solid balance sheet and order book, after several overseas contracts ran into difficulty. Expert were asked to seek alternatives.
After consulting their broker, Expert was recommended to several finance providers. The deal was complex, with a high concentration needed for one of the debtors and it required a specialist understanding of the industry to structure the facility appropriately and support the client’s operations. Nucleus was the only funder who were able to fully meet their requirements and was able to match the previous provision and deliver the bespoke £8m Invoice Discounting facility that Expert needed.
Nucleus team spends time getting to know all the businesses that the company funds and this client chose them because of the flexibility and the direct access to decision makers that they offer.
Angelo Luciano, CEO: “Nucleus took the time to understand our business and the challenges around the nature of our project related trading. Nucleus offered a flexible solution that allows us to have other sources of funding where appropriate.”
Chirag Shah, CEO, Nucleus: “It’s personally rewarding to support businesses that represent the heartland of the British manufacturing and construction industry, a profitable sector that contributes to job creation and driving the UK economy.”
Contact details:
Email: contact@nucleus-cf.co.uk
