New company provides
up-front cash to lessors. Fred Crawley reports.
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A new entrant to the
industry, Silom, is looking to get involved in leasing deals by
offering its agreement to buy assets at the end of lease terms for
a cash present value.
Silom’s offering is designed
to provide a funding to lessors finding it hard to stretch existing
lines of credit.
The company says it will
provide up-front cash to lessors for future expectations of
equipment values, pulling forward the profit that lessors stand to
make at the point of lease-end equipment disposal. This gives
immediate cash to lessors with capital locked up in leased assets
and simultaneously takes away residual value risk on
deals.
Managing director Guy Doole
said that equipment can be pledged to Silom at any time during a
primary leasing term, from commencement to the final year of
leasing, for an immediate non-recoursed cash settlement.
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By GlobalData“The claim Silom has is
represented by a junior security reflecting the asset, and is
satisfied after the lessor and mainstream funders have recovered
their financial entitlement fully from the lease,” Doole
said.
In the case of a lease that
performs to term, full title to equipment would pass to Silom after
the last rental payment is made.
For a lease in default, Silom
would get involved in the repossession and sale process, with cash
proceeds passing on to Silom usually after the satisfaction of the
lessor’s claim.
Doole said that Silom would
like to begin working with portfolios of £1m (€1.2m) in total
future asset values, made up of individual assets above £50,000 in
future value, and with additions to the initial portfolio made at
£250,000 increments.
He added that he wants to
build an overall portfolio for Silom comprising a mix of remaining
term lengths across a number of lessors, usually ranging between
nine months to five years.
Doole said: “As our money is on the line, lessors know we
are aligned with them in seeking good performance from their
lessees and the orderly disposal of equipment when
returned.”
