Venture Finance has made a success of providing a diverse range
of leasing products for SMEs
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Increasingly lessors are saying that the future lies in
diversity. One ex senior asset finance specialist, for instance,
remarked last month that a mix of asset based lending, property
finance, stock finance, and leasing serves both as a cushion to
limit the impact of credit crunches, and maximise the potential for
cross selling.
One UK-based company, Venture Finance, a subsidiary of ABN AMRO,
the Dutch bank currently the subject of buyout bids, boasts many of
these products – and by all accounts is not doing too badly. In
recent weeks it announced a 24 per cent year-on-year increase in
advances to new clients during the first half of 2007, and over the
past 12 months has seen a 31 per cent increase in the size of its
client base. Profits totalled £14m at the end of its last financial
year.
One important driver behind this growth, it appears, has been its
ability to provide its customers with a range of products, a
strategy that as well as satisfying its own bottom line, also
assists its clients, all of whom are small and medium sized
enterprises. Its units include an invoice discounting business
(which is relationship, as opposed to online driven), comprised of
trade finance and its small firms loan guarantee lending arm, and
an asset based lending business, which provides mid tier and
structured financings of up £50m across a range of receivables
sectors, including real estate, equity warrants and cash flow
loans.
In 2006 Venture, whose loans range from £5,000 to £250,000,
launched Vendors Factors Direct, an online factoring business
providing finance of up to £1m to SMEs, which during the first six
months of 2007 contributed to 23 per cent of all new deals. Another
unit which also specialises in factoring sources business through
establishing relationships with customers.
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By GlobalDataTailored packages
While these businesses exist separately the company aims to
maximize cross selling – a process which is naturally assisted by
the similarity between its product.
“We do things in packages,” said Steve Websdale, Venture Finance’s
director. “We look at cash flow requirements of clients going
forward, and we would not just offer stock financing facilities,
for instance, instead it would be sold as part of a package. This
way we are able to make available to businesses a finance package
which pure asset based lenders may not be able to do.”
He added that an important part of Venture’s strategy is to give
client businesses “the headroom for them to keep going”. This, and
its emphasis on multi product packages, are also at the heart of
its use of the small firms loan guarantee scheme. Venture was the
first independent financier in the UK authorised to be a lender
under the scheme, in which the government lends 75 per cent to a
business, which are required to have an annual turnover of up to
£5.6m, and the private company provides the rest.
Lower risk loans
SFLGs, which are provided to companies that are unable to get loans
from the conventional marketplace, are an excellent selling tool
for Venture as it only provides them along with a factoring
product. “It’s good for cross selling,” said Websdale. They are
also reasonably low risk as most of the loan is provided by the
government, and in some cases lenders have required guarantees from
borrowers as a condition of the loan. Furthermore, to be eligible
companies need to be less than five-years-old, and are therefore
young and in need of building their capital base, as opposed to
being old and riddled with internal problems.
Despite this, across Britain the scheme has not had much success of
late, and there have been calls for its closure. Lending under it
fell by 55 per cent last year to £210m, against £422 million the
year before, and the number of loans fell from 6,000 to 2,700,
losses which Websdale attributed to a lack of good promotion of the
project by the government.
Either way, SFLGs fit well with the firm’s strategy of cross
selling its wide range of products. However, being successful at
doing this also requires having sufficient infrastructure to ensure
staff across departments are talking to one another. While many of
its units are segmented, credit, risk, IT, accounting and trade
finance exist as a cross functioning department. All these units
are replicated out of two offices, one in Haywards Heath, in East
Sussex, servicing clients south of Birmingham, and another in
Salford Keys looking after those to the north of the Midlands
city.
There is some uncertainty, meanwhile, about the future of the
company as a condition of the part acquisition of ABN Amro, of
which Venture is a subsidiary, by Fortis is
the sale of ABN’s Dutch factoring business. “It appears there might
be implications,” Websdale commented. But for a company on the
make, there should be no shortage of potential buyers, if that
route is ever taken.
