This less then rosy picture echoes a recent
article published in this magazine several months ago. It listed a
number of players which are still active in the market, albeit with
stricter underwriting policies in place – including Hitachi
Capital, ING Lease, Siemens Financial Services and Kaupthing Singer
& Friedlander – and also several which had exited the
market.
Go deeper with GlobalData
Access deeper industry intelligence
Experience unmatched clarity with a single platform that combines unique data, AI, and human expertise.
It is likely that the list of exited players
has grown even longer over recent weeks.
This lack of interest is partly to do with
capital shortages, but is also to do with the state of the
market.
Fraud, for instance, is on the rise in this
sector, according to Tracey Welch, who runs London-based Virtual
Lease Services (VLS), a fully-owned subsidiary of Germany’s GFKL
Financial Services which specialises in portfolio management and
collections for block discounting. Double financing fraud is
particularly prevalent, as it is in the leasing sector
generally.
Improvements in billings, collections and
arrears management might also help the sector, sources close to the
industry said.
US Tariffs are shifting - will you react or anticipate?
Don’t let policy changes catch you off guard. Stay proactive with real-time data and expert analysis.
By GlobalDataThey talked about the importance of having a
strong centralised audit function, and also about the need for
providers to better understand that, in block discounting, the
finance company is the customer, not the underlying companies.
“They are not underwriting the bottom
customer, they are underwriting the finance company,” said
Welch.
Neil Richards, another director at VLS, admits
block discounters still need to understand the underlying customer
and assess the risk they are taking.
However, he added: “You don’t want to analyse
credit with every deal that comes in, because that’s not what block
discounting is about, and the costs are too great.”
Good management aside, block discounting could
be a lot more popular than it is, particularly as it is about
lending to SMEs, a market both in vogue in the current depressed
environment, and also which is in part propped up by the
government.
As Welch remarked: “Block discounting is a
fantastic way of pushing down cash to SME-sized businesses that
need it, because the block discounting customers are traditionally
niche finance players or they are in vendor situations and most of
their customers are SMEs.”
It is also worthwhile not forgetting that,
with bank lines becoming ever shorter, leasing companies are more
reliant than ever on block discounters for survival.
Antonio Fabrizio
