Yorkshire and North East Dealmakers Guide 2016 - 17

Q&A 17 From alternative to mainstream: Has asset-based lending evolved into a staple lending product? There is no doubt that asset-based lending (ABL) has evolved into a more widely used debt product, with more companies in the UK turning to ABL to support their working capital needs and overall growth, whether organic or through acquisition. director of loan originations Email: Tom.Weedall@ wellsfargo.com Disclosures: The opinions expressed in this document are general in nature and not intended to provide specific advice or recommendations for any individual or association. The opinions of the author do not necessarily reflect those of Wells Fargo Capital Finance or any other Wells Fargo entity. Wells Fargo Capital Finance is the trade name for certain asset-based lending and senior secured lending services of Wells Fargo Capital Finance (UK) Limited and Wells Fargo Bank, National Association (WFBNA). Wells Fargo Capital Finance (UK) Limited is a whollyowned indirect subsidiary of WFBNA, and a private limited company incorporated under the laws of England and Wales with its head office and registered office at 90 Long Acre, London WC2E 9RA. Wells Fargo Capital Finance (UK) Limited is registered with the UK's Companies House under company number 02656007. WFBNA is a national banking association organised under the laws of the United States with its head office at 420 Montgomery Street, San Francisco, CA 94104, USA. WFBNA is registered with the U.S. Office of the Comptroller of the Currency. WFBNA is registered with the UK's Companies House under number FC026633. WFBNA is subject to regulation by the Financial Conduct Authority in the UK and limited regulation by the Prudential Regulation Authority. Details about WFBNA's regulation by the Prudential Regulation Authority are available from WFBNA on request. But there still remains some lack of awareness, and a historic reputation as lender of last resort. Furthermore, many companies that would qualify for traditional bank financing may prefer ABL based on a number of factors: * ABL provides flexibility as it traditionally carries fewer financial covenants, therefore supports businesses throughout changing economic cycles. * The nature of the relationship engenders a close and open connection between borrower and lender. This gives the lender a strong understanding of the business and its sector, which can help the lender remain comfortable through periods of transition. * An ABL structure involves a revolving funding facility rather than a fixed amortised term loan. This can help provide both overall flexibility and greater credit availability during seasonal cycles. ABL structures can also include term loans secured against property and plant and machinery. * ABL can deliver economic benefits to borrowers, such as lower borrowing costs, given the collateralised nature of funding. * ABL can support business growth with increased availability as asset values rise. ABL facilities can also grow in line with business expansion and investment in working capital assets. So, while ABL is on the rise in the UK, opportunity still exists to help companies of varying sizes understand the benefits of ABL and how it is a flexible option that can be used to support both short-term working capital needs and longterm goals. Q&A Tom Weedall From a sector perspective, at Wells Fargo Capital Finance we've seen strong interest in ABL within retail, distribution, equipment rental, and manufacturing. We've also found opportunities to deliver flexible senior secured funding options to businesses in less traditional sectors, such as professional services and technology. Additionally, we've had great success working with private equity firms to support their acquisitions and the ongoing working capital needs of their portfolio companies.

Table of Contents for the Digital Edition of Yorkshire and North East Dealmakers Guide 2016