LHE Finance – Packaging in a more attractive light
In what some might call the halcyon days of bank lending, when all you had to do was ask and your banker almost fell over himself to start piling the pounds into your outstretched hands, the question of the right way to approach the problem became something of a lost art for many operators.
A pity, as those halcyon days soon turned into the almost inevitable recession, leaving today’s bankers with a seemingly permanent ‘No’ ready as their response to almost any request for support.
A pity, as the popular wisdom seems to be that the recession may have been neither as deep nor as long-lasting as it has, had they just had their ‘No’ ready a little more often in the past.
So, what of today? How does the modern operator, faced with the legacy of the recession and an ageing fleet, maybe premises in need of renovation or workshops in need of re-equipping, go about asking for and finding a source for funding?
The answer seems to lie in the art of planning a little way ahead, and of packaging your business in its most attractive light and ignoring the traditional lenders, many of whom still seem to find that ‘No’ an almost over-effusive response. At a time when out-sourcing has become the norm for very many services, the way forward for finance seems to be in-sourcing.
Who do you call?
Barry Hymers is a game-keeper turned poacher. An ex banker, a senior funding manager, for the past 10 years he has been running LHE Finance (LHE) in the bus and coach sector, a business he describes as ‘brokerage with a few very important differences’. Not the least of those differences appears to be the team of specialist funders within the LHE operation, so we asked him about his views on the best way forward for operators who are simply not big enough, or gold-chip enough, to find themselves being chased by those banks that may still be prepared to lend.
He was reassuringly straight-forward. ‘The problem for some years now has been that, despite the recession, far too many operators simply haven’t changed the way they do things when it comes to funding. Even now, there seems to be a belief among some in the industry that there are still no-deposit, 10-year deals based on the value of the new assets out there. But I can tell you that those types of funding offers are gone – long gone.’
‘Today, because of the tough times we’ve all been living through, there’s almost always a pretty hefty working overdraft in place for the SME operators. So when, as tradition still seems to drive them to do, they approach their normal banks to get funding for fleet renewals, business acquisitions, new premises and the like, the bank takes one look at the balance sheet and out comes the ‘No’ you referred to earlier. But those traditional banks and the ways of approaching them are not the whole picture.’
‘Though many people may find it hard to believe, there is money out there, sensibly priced money looking for funding opportunities; so these days we spend time well in advance of any funding requirement for our operator customers, trying to make their deal stand up. In fact, we have a growing number of operators who simply work routinely with us to keep their businesses’ financial profile up-to-date and prepared for their next funding requirement. As soon as they need funds, we are fully equipped to go into action for them.’
Making it happen
Given the growth of LHE Finance in recent recessionary times, it seems they are making many operators’ deals stand up. And it certainly doesn’t hurt Barry Hymers’ proposition that it won’t cost the operator a penny to work with LHE in this way. So what’s involved and is there a lesson here for all of us?
Well, to start with it helps that LHE has spent time and resource developing a very impressive panel of lenders that all have an appetite for funding into the bus and coach arena. While we might not recognise every single one of the names, the expertise and experience within LHE mean these are all solid and dependable funders. What in turn helps these funders enormously is the process that Barry and his team go through to ensure any operator business they propose to them is properly represented and all the work has been done in advance: that the deal stands up.
Barry Hymers again, ‘The difficulty many SMEs have is that they are so busy running their operations, they don’t always have the time to spend on reviewing just how they are stacking up as a ‘lendable’ business. Our job primarily is to work with operators to help them understand the value of their business and its current assets. The way it may already be borrowing, the attractiveness of their current profit and loss statement and so on – everything that can be packaged up to make them a desirable proposition to a lender. There is always risk attached to any funder’s activities, so what we have to do is prepare a case for an operator that says to the lender, ‘here is an acceptable risk.’
‘Whether we like the idea or not, the fact of the matter is that too many operators will not necessarily know how to go about presenting themselves properly. Their banks are all busy looking for ways to say ‘No’, and those operators are making it too easy for them to say it.’
Planning ahead
One of the major pitfalls that Barry Hymers points out is that far too many operators think that simply getting a finance quote well ahead of any need is the same thing as looking for credit approvals and limits in advance. Almost any finance business will happily give you a quote, and naturally they will try to make it as attractive as they can, but, unfortunately for the operators involved, far too often this can lead to situations where what has been quoted and what is deliverable are not one and the same. He makes the point that, without proper pre-planning, this can be a nasty shock to any operator who has assumed they would get the quoted deal – often when it is too late to make sensible alternative plans.
As a part of Dawsongroup, the successful independent rental and leasing business involved in buses, coaches, trucks, trailers, vans, mechanical handling, sweepers, cold storage and so on, LHE is in a position to get involved in more than just finding funding. Says Barry Hymers, ‘In our efforts to obtain funding for operators and relieve them of much of the hassle and heart-ache of the deal preparation, we can even get involved in the whole process if they wish: from specifying vehicles though to procuring at best rates (Dawsongroup has some 20,000 assets in place and is a major buyer in all its key markets), managing residual value risk and on to finding the best HP or Leasing deals.’
Rather than having to go to bank after bank after bank in your search for the funding deals you need, you have what is almost a one-stop-shop where you are in-sourcing your funding through the help of LHE. And as we’ve said before it cost you nothing to use them like this, as their income derives from their introductions of would-be borrowers to their funding panel. And because rates are so carefully matched by these funders, there’s no chance you will find your deal loaded to cover their payment to LHE.
As Barry Hymers has said however, it takes planning to ensure the best results. ‘We’re here to help operators,’ he says, ‘and the best way we can do that is when they come to us in advance of actually looking for funds. It’s a two-way street to success because, if we know what’s coming up, we can do all the preparation I talked about earlier and get our funders in place to do the deal when the operator is ready. While from the operators’ points of view, he, either with us in partnership or not, can look to drive the very best acquisition deals as he knows he has the cash to back him up when negotiating. It doesn’t matter whether it’s vehicles, equipment, premises or a business acquisition, cash in hand makes you a very great deal more attractive to sellers.’
As with so many other aspects of our industry, it seems planning and making moves in advance of running up to a need is the most productive way to go. In an area in which so many of us can feel a little hesitant, nervous even, it makes sense to find someone like Barry Hymers at LHE; a man who knows the funding world intimately and has the means to help operators find the finance they need.