Asset-based financing
If your company has possessions (assets) that are solid, financiers are often willing to finance earlier and more. Think of orders, stocks, debtors and machinery. These assets are collateral for the financier. This means that if your company cannot meet its obligations, the financier can still (largely) repay the loan provided by selling the assets.
In addition to SMEs, larger companies in the Netherlands are also increasingly turning to asset-based financing. This is because the pricing of these forms of financing is getting better and better. After all, banks need to hold less capital if the financing is based on good assets.
Off-balance sheet financing
You also have the option of financing your assets off balance. In this, you sell your assets (often accounts receivable) to the lender, removing them from the balance sheet. The balance sheet reduction that then occurs improves various ratios on the balance sheet. This, in turn, often prompts banks to charge lower interest rates. After all, improved ratios mean they need to hold less capital and the risk rating improves.
Note that off-balance sheet constructions are often only interesting for larger volumes. The legal, tax and accounting costs that have to be incurred to set up such a construction are quite high. Ultimately, the auditor must issue an unqualified opinion for the off-balance financing.
Case study
We recently set up an international financing programme for a Swiss multinational. This involved selling the accounts receivable of all operating companies to a Special Purpose Vehicle (SPV) in the Netherlands. The SPV resells the receivables directly to the financing company. Combined with a specially set up credit insurance and the fact that the finance company buys the receivable non-recourse (unconditionally), the debtor financing is off balance. This chosen structure makes it relatively easy to add new operating companies.
Want to know more?
Want to know more about asset-based financing and the possibility of doing it off-balance?
Contact us at info@xolv.nl or 073 - 820 02 95.
