Deloitte: Challenging market conditions entice alternative lenders to the North West
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Nigel Birkett, partner and head of debt advisory, Deloitte North West
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Alternative lending sources have matured significantly in recent years to become an accepted and credible part of the funding mix. Now, challenging market conditions are fuelling the growth of these sources, including asset based financiers and debt funds, and having a significant impact on the face of the lending landscape. Figures from the Asset Based Finance Association (ABFA) show that the share of facilities above £10m in the overall market has more than doubled from four per cent to nine per cent between 2001 and 2011. The trend demonstrates that larger corporates are acknowledging the industry, once seen as a ‘lender of last resort’, and see its value as a funding source. Where there is growth, there is opportunity. A number of US financial heavyweights have seen the gap left by stricter bank lending criteria, and have entered the UK market. The introduction of firms including Wells Fargo and PNC to the UK through Burdale Financial and KBC Business Capital (now PNC Business Credit), are just a few. Together with the established lenders in the market, this form of funding is becoming more accepted in the mid-market arena. The North West itself has a sizeable asset based lending industry that will only get stronger in the years to come. At Deloitte, we recently advised on the £80m refinancing of construction and engineering materials supplier WT Burden, which generated significant appetite from asset finance lenders. The number of debt funds is also increasing and can offer an alternative to traditional bank finance. Whilst debt funds to date have typically targeted larger companies, recent funds launched such as Metric Capital and Encina are focusing on the mid market. As banks continue to focus on strengthening their own balance sheets, increased liquidity appears some way off. The increased availability of alternative funding, including asset based lending and mid market debt funds, and the wave of new entrants have changed the dynamics of securing finance. Corporates in the North West, which have had a tough time in recent years, now have credible alternatives to bank lending and competition to existing lenders, which can only be a good thing for the region. Nigel Birkett is a partner and head of debt advisory at Deloitte in the North West
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