This document discusses various financing solutions available from Lloyds TSB Corporate Markets, including asset financing instruments like finance leases, operating leases, and sale and leaseback agreements. Finance leases allow businesses to obtain assets with minimal upfront costs while benefitting from competitive rates. Operating leases provide flexibility and off-balance sheet treatment for short-term assets. Sale and leaseback agreements allow businesses to release capital from existing assets while maintaining use through a leaseback.
The document discusses strategies for improving cash flow and managing cash effectively in a business. It recommends generating cash from sources like private placements, accelerating customer payments, leveraging assets, and developing new products. It warns against manipulating reports or offering extended payment terms to improperly boost short-term cash at the expense of future sales. The document also stresses controlling costs, using metrics like discounted cash flow and payback period to evaluate projects, and implementing operational changes through outsourcing to lower costs and generate cash.
An Introduction to Mergers & Acquisitions. If You Would Like to Learn How to Value a Company and become Proficient at Financial Modeling use our special deal offer until the 31st of December:
https://www.udemy.com/beginner-to-pro-in-excel-financial-modeling-and-valuation/?couponCode=exceldeal
The document discusses various types of mergers and acquisitions including horizontal, vertical, conglomerate mergers as well as acquisitions. It also discusses leveraged buyouts and different types of corporate restructuring activities such as divestitures, spin-offs, and split-ups. The key reasons for mergers and acquisitions include increasing market share, achieving economies of scale, and expanding into new markets or products. Mergers and acquisitions can fail due to cultural differences, lack of integration planning, and poor management of stakeholders.
The document discusses three methods for owners to transfer their company to key employees:
1. A long-term installment sale where the employees promise to pay the agreed value to the owner over 7-10 years through installment payments.
2. A leveraged management buyout where the transaction draws on management resources, outside equity, and significant debt financing. This structure can reward key employees and position the company for growth while minimizing the owner's ongoing risk.
3. A modified buyout that uses both an installment sale and outside financing to affect the buyout, reducing the owner's risk compared to a standard installment sale. Outside financing is obtained through private equity firms who partner with management to create shareholder value.
Trade credit is an agreement where a customer can purchase goods without paying cash up front, instead paying the supplier within an agreed upon timeframe, usually 30-90 days. It provides short-term financing for businesses as suppliers extend credit to customers to purchase goods and services, allowing for deferred payment. Trade credit is an important source of working capital financing for companies as it reduces their capital requirements and is an automatic and easy source of short-term funds without requiring formal agreements.
Ten Types of Business Financing You May Not Have TriedInsideUp
This document discusses 10 types of business financing options including factoring, merchant cash advances, lines of equity, equipment loans and leases, commercial mortgages, microloans, SBA loans, franchise financing, SBA 504 loans, and the loan application process. It provides brief descriptions of each financing type and notes some of their key terms and requirements. The overall document serves as a guide to help business owners identify suitable financing options to meet their needs and grow their business.
Financing options to help your business growInsideUp
This document provides an overview of various financing options available to help businesses grow, including business loans, merchant cash advances, home equity loans, equipment loans and leases, commercial mortgages, microloans, SBA loans, franchise financing, and SBA 504 loans. It discusses the types of each option, eligibility requirements, acceptable uses of funds, loan approval processes, and ensuring applications address the five C's of business credit.
Buying out the Boss: How to Acquire the Company You Work ForMichael Vann
This presentation was delivered by Jeff Fialky of Bacon & Wilson, P.C. and Michael Vann of the Vann Group. The presentation covers the various elements of a transaction and identifies all the things someone interested in buying the company they work for.
The presentation is broken down into four sections: 1) emotion; 2) knowledge; 3) strategy; and 4) tactics.
The document discusses strategies for improving cash flow and managing cash effectively in a business. It recommends generating cash from sources like private placements, accelerating customer payments, leveraging assets, and developing new products. It warns against manipulating reports or offering extended payment terms to improperly boost short-term cash at the expense of future sales. The document also stresses controlling costs, using metrics like discounted cash flow and payback period to evaluate projects, and implementing operational changes through outsourcing to lower costs and generate cash.
An Introduction to Mergers & Acquisitions. If You Would Like to Learn How to Value a Company and become Proficient at Financial Modeling use our special deal offer until the 31st of December:
https://www.udemy.com/beginner-to-pro-in-excel-financial-modeling-and-valuation/?couponCode=exceldeal
The document discusses various types of mergers and acquisitions including horizontal, vertical, conglomerate mergers as well as acquisitions. It also discusses leveraged buyouts and different types of corporate restructuring activities such as divestitures, spin-offs, and split-ups. The key reasons for mergers and acquisitions include increasing market share, achieving economies of scale, and expanding into new markets or products. Mergers and acquisitions can fail due to cultural differences, lack of integration planning, and poor management of stakeholders.
The document discusses three methods for owners to transfer their company to key employees:
1. A long-term installment sale where the employees promise to pay the agreed value to the owner over 7-10 years through installment payments.
2. A leveraged management buyout where the transaction draws on management resources, outside equity, and significant debt financing. This structure can reward key employees and position the company for growth while minimizing the owner's ongoing risk.
3. A modified buyout that uses both an installment sale and outside financing to affect the buyout, reducing the owner's risk compared to a standard installment sale. Outside financing is obtained through private equity firms who partner with management to create shareholder value.
Trade credit is an agreement where a customer can purchase goods without paying cash up front, instead paying the supplier within an agreed upon timeframe, usually 30-90 days. It provides short-term financing for businesses as suppliers extend credit to customers to purchase goods and services, allowing for deferred payment. Trade credit is an important source of working capital financing for companies as it reduces their capital requirements and is an automatic and easy source of short-term funds without requiring formal agreements.
Ten Types of Business Financing You May Not Have TriedInsideUp
This document discusses 10 types of business financing options including factoring, merchant cash advances, lines of equity, equipment loans and leases, commercial mortgages, microloans, SBA loans, franchise financing, SBA 504 loans, and the loan application process. It provides brief descriptions of each financing type and notes some of their key terms and requirements. The overall document serves as a guide to help business owners identify suitable financing options to meet their needs and grow their business.
Financing options to help your business growInsideUp
This document provides an overview of various financing options available to help businesses grow, including business loans, merchant cash advances, home equity loans, equipment loans and leases, commercial mortgages, microloans, SBA loans, franchise financing, and SBA 504 loans. It discusses the types of each option, eligibility requirements, acceptable uses of funds, loan approval processes, and ensuring applications address the five C's of business credit.
Buying out the Boss: How to Acquire the Company You Work ForMichael Vann
This presentation was delivered by Jeff Fialky of Bacon & Wilson, P.C. and Michael Vann of the Vann Group. The presentation covers the various elements of a transaction and identifies all the things someone interested in buying the company they work for.
The presentation is broken down into four sections: 1) emotion; 2) knowledge; 3) strategy; and 4) tactics.
Trade credit is an agreement between a company and customer where goods or services are provided upfront and payment is made later, within an agreed upon time period. There are various forms of trade credit used across industries to efficiently leverage capital for business objectives. While cash discounts incentivize early payment, late payments are penalized with interest charges usually between 1-2% per month, costing up to 12-24% in penalties if unpaid for a full year. Common examples of companies offering trade credit terms include furniture stores DFS and Bed Shed as well as car dealerships Arnold Clark and Carpet Master.
Acquisition Financing for Fundless Sponsors: 6 Ways to Negotiate Better Indep...Greg Tobben
Independent sponsor economics are paramount for those operating under a fundless sponsor model. Key components such as deal fees, management fees and carried interests are the reason you're in business.
In this presentation, Acquisition Financing for Fundless Sponsors: 6 Ways to Negotiate Better Independent Sponsor Economics, we'll walk through several practices you can use to get more transactions across the finish line and put yourself in a better position when negotiating with capital providers.
About Access Capital Partners:
Access Capital Partners is a middle market investment bank focused exclusively on raising capital for fundless or independent sponsors, operating executives, management teams and family offices.
We've Leveraged Years of Experience in Raising Capital Across a Wide Variety of Situations to Develop a Focused Effort Tailored to the Unique Needs of Independent or Fundless Sponsors.
This document provides a product matrix for Liquid Capital that describes 7 different types of financing products they offer including factoring, purchase finance, purchase order finance, asset based lending, export financing, equipment leasing, and cash advances. For each product, a brief description is given along with the typical target client in terms of business size and annual revenue as well as the typical facility or funding size available. The document concludes by highlighting key aspects of why Liquid Capital is a full-service working capital and trade finance company.
This document discusses trade credit, accrued expenses, and deferred income. Trade credit involves a supplier sending goods to a buyer on credit terms. Accrued expenses are expenses incurred but not yet paid, like accrued wages. Deferred income is money received before it is earned, like rent paid in advance. The key difference between accrued expenses and deferred income is that accrued expenses are costs already incurred but unpaid, while deferred income is money received before being earned.
Making the Most Out of the Independent Sponsor Model - Access Capital Partners Greg Tobben
For most independent sponsors, especially new ones, it’s helpful to get perspective on how different groups have implemented the independent sponsor model and learn what’s working for other groups and what’s not.
As advisors to this expanding group of investors, we speak regularly with both new and long-time sponsors, as well as independent sponsor capital providers. Here are 6 guidelines to help you get the most out of the independent sponsor model:
A deposit is a pre-agreed instalment towards the purchase price in a sale contract.
The Courts have held that the 2 functions of a deposit are to be:
- an earnest commitment to bind the bargain, which means a deposit acts as an indication the Buyer is serious in carrying out the bargain; and
- a guarantee of due performance, that is security of the performance.
A deposit is usually paid at or upon shortly upon the buyer’s signing of the contract.
Usually, a deposit should be no more than 10% of the total purchase price, and commonly may be less. Note: there is no specific laws on that deposit percentage amount per se*.
The other practical, commercial and financial reasons for why a deposit is useful:
> Often the seller will incur not-insignificant fees and expenses (e.g. sale preparatory work and undergoing due diligence, applying to lessor for consent to assignment of lease etc), independent of whether the actual contract proceeds to settlement or completion. So may be also used to partially-compensate for some of those costs incurred If the buyer ultimately walks away”.
> Loss of potential, other sale opportunities during the express or implied exclusivity period during the conditions precedent of sale contract. This could be months or longer
> It's good to have the buyer show it has “skin in the game” by having such "hurt money" put upfront on & the table.
Tip: Even with the best of Confidentiality Deeds/NDAs , the deposit helps reinforce the value and proprietary nature of the seller’s business or entity.
> Not uncommonly, the Buyer entity may be newly-established . Therefore, if there is default or repudiation, even if they are subsequently pursued by the seller, the Buyer may not have any actual capitalisation to be realised against!
> Lastly, if a buyer or won’t (or can’t!?) put up even the deposit, then you should have serious concerns about their financial capacity to commit all the way through the transaction.
Risk intelligence: How to reliably mitigate transaction risk and secure clean...Graeme Cross
This risk intelligence white paper is part of a series of publications from Aon Strategic Advisors & Transaction Solutions (ASATS). The series focuses on risk management and mitigation and is specifically created to help:
• Chief executives and corporate management board members pursuing growth strategies through M&A, or divesting
• Corporate tax managers, development officers and legal counsel responsible for planning, overseeing and / or delivering planned value from M&A
• Chief executive and chief financial officers of private-equity backed portfolio companies
• Private equity executives, portfolio managers and risk officers
• Corporate finance, accounting, tax and legal advisors servicing corporate and private
equity clients
The document discusses accounting standards for long-lived assets, including intangible assets. It notes that intangible assets are nonphysical assets that provide future economic benefits. The standard provides guidance on recognizing, measuring, and disclosing intangangible assets. It also discusses impairment testing of intangible assets to ensure they are carried at recoverable amounts. The standard applies to identifiable intangible assets and goodwill, but not to internally generated goodwill or brands.
Interested in buying the company that you’ve been helping to build but are unsure of the implications behind a management buyout? Or are you a company owner looking to sell and wondering what the concerns of a prospective management team could be? Join our experts & learn everything you need to know to pursue a successful MBO.
To view this Welch LLP webinar (and others), click here: http://www.welchllp.com/resource-centre/videos/webinars/
This document provides definitions for over 100 financial and investing terms related to private equity, venture capital, and initial public offerings. Some key terms defined include:
- Private equity fund - A pool of capital raised periodically by a private equity organization, usually in the form of limited partnerships with a 10-year life.
- Limited partner - An investor in a limited partnership who can monitor progress but not manage day-to-day operations while retaining limited liability.
- General partner - A partner responsible for a fund's day-to-day operations who assumes all liability for debts.
- Initial public offering (IPO) - The first sale of stock to public investors of a previously private firm, typically
Financing Acquisitions Using Debt CapitalGreg Tobben
SC Credit Advisors provides financing advisory services for middle market acquisitions. The document includes a case study comparing two capital structures for a $100 million acquisition - a more conservatively leveraged structure with $60 million total debt and an alternative with $75 million total debt. It also discusses considerations for evaluating debt capital and different capital solutions for acquisition types such as conventional, distressed, or those involving multiple acquisitions. SC Credit Advisors aims to develop tailored financing solutions to allow clients to focus on running their businesses.
Key & Common Negotiated Provisions - Part 1 (Series: PRIVATE COMPANY M&A BOOT...Financial Poise
Although every deal is different, understanding any purchase/sale agreement will help you understand other purchase sale agreements. Stated another way, most M&A documents include a similar set of sections and use a similar vocabulary. Episodes 3 and 4 of this series explain specific, common provisions and discuss how buyers and sellers approach these provisions differently, particularly in light of situational differences (e.g. whether the assets being bought and sold are equity of a company or the assets of a company; whether the seller is going to cease to exists or not). Between Episodes 3 and 4, topics covered will include tax issues; corporate governance; closing conditions; representations and warranties; indemnification provisions; earn-outs; restrictive covenants; antitrust; intellectual property; and employment issues.
To view the accompanying webinar, go to: https://www.financialpoise.com/financialpoisewebinars/on_demand_webinars/common-negotiated-provisions-part-1/
Structuring and Financing a Partner BuyoutGreg Tobben
Buying Out a Business Partner or Shareholder: Structuring and Financing the Deal
When an entrepreneur starts a new business, planning for a buyout of a business partner years in the future is rarely a top priority- but maybe it should be.
As businesses grow and evolve, so too do ownership or shareholder groups. The same partners or investors who took a company from startup to $20 million in revenues aren’t necessarily the right people to grow the company from $20 to $50 million, or $50 to $150 million, and so on.
Layer in retirements, partnership disputes and absentee or non-strategic owners receiving generous compensation, and making changes in ownership becomes increasingly more important (and costly) as the business grows.
On the next few pages, we’ll discuss:
1. When a Partner Buyout is a Solution
2. Valuing the Business
3. Structuring a Partner Buyout
4. Financing a Partner Buyout
5. Questions a Business Owner Should Ask When Raising Capital
6. Using an Investment Banker to Raise Capital for the Buyout
About Access Capital Partners:
Access Capital Partners is a middle market investment bank that provides strategic advisory services, raises capital for companies (growth, refinancing, restructuring, acquisitions, partner buyouts, management buyouts, leveraged buyouts), and helps business owners sell or recapitalization their companies.
We are shareholder centric and have deep experience in the middle market. With over 100 transactions representing over $8 billion in volume, business owners leverage our experience as they navigate through inflection points and ultimately achieve personal liquidity.
Alternative Structures- PO Financing, Factoring & MCA (Series: Business Borro...Financial Poise
Purchase-order financing (P/O financing) is a type of asset-based loan designed to extend credit to a company that needs cash quickly, to fill a customer order. A company may operate with such a small amount of working capital that it cannot afford to pay the cost of producing a customer’s order. P/O financing enables such a company to not turn away business, by borrowing from a lender using the purchase order itself as collateral to support a loan.
Factoring is one of the oldest forms of business financing. Note that the term is “financing” rather than “loan” because factoring is not actually a loan. In a typical factoring arrangement, the company needing financing makes a sale, delivers the product or service and generates an invoice. The factor (the funding source) then purchases the right to collect on that invoice by agreeing to pay the company in need of financing the amount of the invoice minus a discount.
MCA lending is, in summary, an advance on a company’s sales. Financing through a merchant cash advance (MCA) is used mostly by companies that accept credit and debit cards for most of their sales, typically retailers and restaurants. The concept is this: funder purchases a portion of the company’s future credit card receivables for a discounted lump sum. The MCA funder receives the purchased credit card receivables as they are generated either by taking a percentage of the company’s daily credit card proceeds or by debiting a certain amount of funds from the company’s bank account. Depending on the risk profile of the company, it can be a more expensive form of financing for a business compared to other types of financing.
What these three things have in common is that they are each a type of “alternative lending.” Alternative to what? To the type of loan a company can get from a “regulated” commercial bank. This webinar explains these types of financing arrangements, what to consider before entering into them, and provides some tips on how to negotiate them.
To view the accompanying webinar, go to: https://www.financialpoise.com/financial-poise-webinars/alternative-structures-po-financing-factoring-mca-2020/
This document provides an overview and introduction to intangible assets. It discusses the key types of intangible assets including marketing-related assets like trademarks and trade names, customer-related assets like customer lists and relationships, technology-based assets like patented technology and computer software, and contract-based assets like licenses and non-compete agreements. The document defines each type of intangible asset and provides examples to illustrate the different categories.
Structuring and Planning the M&A Transaction (Series: PRIVATE COMPANY M&A BOO...Financial Poise
This document provides an overview and outline for a webinar on structuring mergers and acquisitions transactions. It discusses key drivers that influence transaction structure such as the nature of the target company and acquirer, as well as the type and timing of consideration. It also summarizes some of the main tax considerations and implications for different transaction structures, including taxable asset purchases, stock acquisitions, and tax-free reorganizations. The webinar will cover transaction structures, tax planning, representations and warranties, covenants, and indemnification issues as they relate to M&A deals.
Cash flow refers to the movement of money in and out of a business over time. While a business may be profitable, it can still experience cash flow problems if it does not have enough cash on hand to cover expenses. This can occur if customers take too long to pay, assets are purchased all at once, or inventory is expanded too quickly. The document then provides an example cash flow statement that shows a business becoming overdrawn in May due to higher cash outflows than inflows that month. To remedy short-term cash flow issues, businesses can delay some payments, negotiate longer credit terms, or take out loans until cash flow improves. Maintaining adequate working capital is important for businesses to stay liquid and pay short-term debts
This revision presentation highlights the key sources of finance potentially available to a new business and outlines the key issues when choosing the source and mix of finance.
The document summarizes accounting for intangible assets including:
1) Intangible assets are identifiable, lack physical existence, and are not monetary assets. They are normally classified as non-current assets.
2) Internally created intangibles that meet certain criteria can be capitalized, otherwise R&D costs are expensed.
3) Limited-life intangibles are amortized over their useful lives, while indefinite-life intangibles and goodwill are tested annually for impairment.
This document discusses accounts receivable management and credit policies. It defines accounts receivable as sales made on credit. Establishing the right credit policy is important because it affects sales, working capital requirements, and bad debt losses. The document outlines key considerations for determining a credit policy, including credit terms, standards, discounts and collection procedures. It also discusses the trade-offs involved, such as higher sales versus increased costs of financing, collection and potential bad debts. Effective management of accounts receivable and prudent credit policies can help optimize current assets and cash flow.
Trade credit is an agreement between a company and customer where goods or services are provided upfront and payment is made later, within an agreed upon time period. There are various forms of trade credit used across industries to efficiently leverage capital for business objectives. While cash discounts incentivize early payment, late payments are penalized with interest charges usually between 1-2% per month, costing up to 12-24% in penalties if unpaid for a full year. Common examples of companies offering trade credit terms include furniture stores DFS and Bed Shed as well as car dealerships Arnold Clark and Carpet Master.
Acquisition Financing for Fundless Sponsors: 6 Ways to Negotiate Better Indep...Greg Tobben
Independent sponsor economics are paramount for those operating under a fundless sponsor model. Key components such as deal fees, management fees and carried interests are the reason you're in business.
In this presentation, Acquisition Financing for Fundless Sponsors: 6 Ways to Negotiate Better Independent Sponsor Economics, we'll walk through several practices you can use to get more transactions across the finish line and put yourself in a better position when negotiating with capital providers.
About Access Capital Partners:
Access Capital Partners is a middle market investment bank focused exclusively on raising capital for fundless or independent sponsors, operating executives, management teams and family offices.
We've Leveraged Years of Experience in Raising Capital Across a Wide Variety of Situations to Develop a Focused Effort Tailored to the Unique Needs of Independent or Fundless Sponsors.
This document provides a product matrix for Liquid Capital that describes 7 different types of financing products they offer including factoring, purchase finance, purchase order finance, asset based lending, export financing, equipment leasing, and cash advances. For each product, a brief description is given along with the typical target client in terms of business size and annual revenue as well as the typical facility or funding size available. The document concludes by highlighting key aspects of why Liquid Capital is a full-service working capital and trade finance company.
This document discusses trade credit, accrued expenses, and deferred income. Trade credit involves a supplier sending goods to a buyer on credit terms. Accrued expenses are expenses incurred but not yet paid, like accrued wages. Deferred income is money received before it is earned, like rent paid in advance. The key difference between accrued expenses and deferred income is that accrued expenses are costs already incurred but unpaid, while deferred income is money received before being earned.
Making the Most Out of the Independent Sponsor Model - Access Capital Partners Greg Tobben
For most independent sponsors, especially new ones, it’s helpful to get perspective on how different groups have implemented the independent sponsor model and learn what’s working for other groups and what’s not.
As advisors to this expanding group of investors, we speak regularly with both new and long-time sponsors, as well as independent sponsor capital providers. Here are 6 guidelines to help you get the most out of the independent sponsor model:
A deposit is a pre-agreed instalment towards the purchase price in a sale contract.
The Courts have held that the 2 functions of a deposit are to be:
- an earnest commitment to bind the bargain, which means a deposit acts as an indication the Buyer is serious in carrying out the bargain; and
- a guarantee of due performance, that is security of the performance.
A deposit is usually paid at or upon shortly upon the buyer’s signing of the contract.
Usually, a deposit should be no more than 10% of the total purchase price, and commonly may be less. Note: there is no specific laws on that deposit percentage amount per se*.
The other practical, commercial and financial reasons for why a deposit is useful:
> Often the seller will incur not-insignificant fees and expenses (e.g. sale preparatory work and undergoing due diligence, applying to lessor for consent to assignment of lease etc), independent of whether the actual contract proceeds to settlement or completion. So may be also used to partially-compensate for some of those costs incurred If the buyer ultimately walks away”.
> Loss of potential, other sale opportunities during the express or implied exclusivity period during the conditions precedent of sale contract. This could be months or longer
> It's good to have the buyer show it has “skin in the game” by having such "hurt money" put upfront on & the table.
Tip: Even with the best of Confidentiality Deeds/NDAs , the deposit helps reinforce the value and proprietary nature of the seller’s business or entity.
> Not uncommonly, the Buyer entity may be newly-established . Therefore, if there is default or repudiation, even if they are subsequently pursued by the seller, the Buyer may not have any actual capitalisation to be realised against!
> Lastly, if a buyer or won’t (or can’t!?) put up even the deposit, then you should have serious concerns about their financial capacity to commit all the way through the transaction.
Risk intelligence: How to reliably mitigate transaction risk and secure clean...Graeme Cross
This risk intelligence white paper is part of a series of publications from Aon Strategic Advisors & Transaction Solutions (ASATS). The series focuses on risk management and mitigation and is specifically created to help:
• Chief executives and corporate management board members pursuing growth strategies through M&A, or divesting
• Corporate tax managers, development officers and legal counsel responsible for planning, overseeing and / or delivering planned value from M&A
• Chief executive and chief financial officers of private-equity backed portfolio companies
• Private equity executives, portfolio managers and risk officers
• Corporate finance, accounting, tax and legal advisors servicing corporate and private
equity clients
The document discusses accounting standards for long-lived assets, including intangible assets. It notes that intangible assets are nonphysical assets that provide future economic benefits. The standard provides guidance on recognizing, measuring, and disclosing intangangible assets. It also discusses impairment testing of intangible assets to ensure they are carried at recoverable amounts. The standard applies to identifiable intangible assets and goodwill, but not to internally generated goodwill or brands.
Interested in buying the company that you’ve been helping to build but are unsure of the implications behind a management buyout? Or are you a company owner looking to sell and wondering what the concerns of a prospective management team could be? Join our experts & learn everything you need to know to pursue a successful MBO.
To view this Welch LLP webinar (and others), click here: http://www.welchllp.com/resource-centre/videos/webinars/
This document provides definitions for over 100 financial and investing terms related to private equity, venture capital, and initial public offerings. Some key terms defined include:
- Private equity fund - A pool of capital raised periodically by a private equity organization, usually in the form of limited partnerships with a 10-year life.
- Limited partner - An investor in a limited partnership who can monitor progress but not manage day-to-day operations while retaining limited liability.
- General partner - A partner responsible for a fund's day-to-day operations who assumes all liability for debts.
- Initial public offering (IPO) - The first sale of stock to public investors of a previously private firm, typically
Financing Acquisitions Using Debt CapitalGreg Tobben
SC Credit Advisors provides financing advisory services for middle market acquisitions. The document includes a case study comparing two capital structures for a $100 million acquisition - a more conservatively leveraged structure with $60 million total debt and an alternative with $75 million total debt. It also discusses considerations for evaluating debt capital and different capital solutions for acquisition types such as conventional, distressed, or those involving multiple acquisitions. SC Credit Advisors aims to develop tailored financing solutions to allow clients to focus on running their businesses.
Key & Common Negotiated Provisions - Part 1 (Series: PRIVATE COMPANY M&A BOOT...Financial Poise
Although every deal is different, understanding any purchase/sale agreement will help you understand other purchase sale agreements. Stated another way, most M&A documents include a similar set of sections and use a similar vocabulary. Episodes 3 and 4 of this series explain specific, common provisions and discuss how buyers and sellers approach these provisions differently, particularly in light of situational differences (e.g. whether the assets being bought and sold are equity of a company or the assets of a company; whether the seller is going to cease to exists or not). Between Episodes 3 and 4, topics covered will include tax issues; corporate governance; closing conditions; representations and warranties; indemnification provisions; earn-outs; restrictive covenants; antitrust; intellectual property; and employment issues.
To view the accompanying webinar, go to: https://www.financialpoise.com/financialpoisewebinars/on_demand_webinars/common-negotiated-provisions-part-1/
Structuring and Financing a Partner BuyoutGreg Tobben
Buying Out a Business Partner or Shareholder: Structuring and Financing the Deal
When an entrepreneur starts a new business, planning for a buyout of a business partner years in the future is rarely a top priority- but maybe it should be.
As businesses grow and evolve, so too do ownership or shareholder groups. The same partners or investors who took a company from startup to $20 million in revenues aren’t necessarily the right people to grow the company from $20 to $50 million, or $50 to $150 million, and so on.
Layer in retirements, partnership disputes and absentee or non-strategic owners receiving generous compensation, and making changes in ownership becomes increasingly more important (and costly) as the business grows.
On the next few pages, we’ll discuss:
1. When a Partner Buyout is a Solution
2. Valuing the Business
3. Structuring a Partner Buyout
4. Financing a Partner Buyout
5. Questions a Business Owner Should Ask When Raising Capital
6. Using an Investment Banker to Raise Capital for the Buyout
About Access Capital Partners:
Access Capital Partners is a middle market investment bank that provides strategic advisory services, raises capital for companies (growth, refinancing, restructuring, acquisitions, partner buyouts, management buyouts, leveraged buyouts), and helps business owners sell or recapitalization their companies.
We are shareholder centric and have deep experience in the middle market. With over 100 transactions representing over $8 billion in volume, business owners leverage our experience as they navigate through inflection points and ultimately achieve personal liquidity.
Alternative Structures- PO Financing, Factoring & MCA (Series: Business Borro...Financial Poise
Purchase-order financing (P/O financing) is a type of asset-based loan designed to extend credit to a company that needs cash quickly, to fill a customer order. A company may operate with such a small amount of working capital that it cannot afford to pay the cost of producing a customer’s order. P/O financing enables such a company to not turn away business, by borrowing from a lender using the purchase order itself as collateral to support a loan.
Factoring is one of the oldest forms of business financing. Note that the term is “financing” rather than “loan” because factoring is not actually a loan. In a typical factoring arrangement, the company needing financing makes a sale, delivers the product or service and generates an invoice. The factor (the funding source) then purchases the right to collect on that invoice by agreeing to pay the company in need of financing the amount of the invoice minus a discount.
MCA lending is, in summary, an advance on a company’s sales. Financing through a merchant cash advance (MCA) is used mostly by companies that accept credit and debit cards for most of their sales, typically retailers and restaurants. The concept is this: funder purchases a portion of the company’s future credit card receivables for a discounted lump sum. The MCA funder receives the purchased credit card receivables as they are generated either by taking a percentage of the company’s daily credit card proceeds or by debiting a certain amount of funds from the company’s bank account. Depending on the risk profile of the company, it can be a more expensive form of financing for a business compared to other types of financing.
What these three things have in common is that they are each a type of “alternative lending.” Alternative to what? To the type of loan a company can get from a “regulated” commercial bank. This webinar explains these types of financing arrangements, what to consider before entering into them, and provides some tips on how to negotiate them.
To view the accompanying webinar, go to: https://www.financialpoise.com/financial-poise-webinars/alternative-structures-po-financing-factoring-mca-2020/
This document provides an overview and introduction to intangible assets. It discusses the key types of intangible assets including marketing-related assets like trademarks and trade names, customer-related assets like customer lists and relationships, technology-based assets like patented technology and computer software, and contract-based assets like licenses and non-compete agreements. The document defines each type of intangible asset and provides examples to illustrate the different categories.
Structuring and Planning the M&A Transaction (Series: PRIVATE COMPANY M&A BOO...Financial Poise
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2. 2
Meeting your Business Needs 3
Asset Financing 4
Finance Leases 5
Operating Leases 9
Sale & Leaseback 13
Long-Funded Leases 17
Structured Loans & Receivable Based Finance 21
Corporate Aircraft Financing 25
Contact Us 28
Glossary 29
Contents
3. As you move through different stages in your
corporate journey, we understand that you have
different banking needs at different times.
Whatever your banking requirements, Lloyds TSB
Corporate Markets can help you to meet your business
objectives. We deliver individual solutions tailored to
your needs – from funding and basic banking services,
to a wide range of specialised finance solutions.
What’s more, if we say we will do something, then
we do it – promptly, proficiently and reliably.
We pride ourselves on being responsive and flexible,
anticipating your changing needs with timely and
tailored solutions.
This is our guide to structured asset financing,
designed to highlight alternative, specialist solutions
that may allow you to grow your business or improve
your company’s cash flow.
The guide includes information and examples of
various financing tools including hire purchase, finance
and operating leasing, sale of receivables, structured
debt and products associated with specialist asset
types such as airplanes and helicopters.
Why you should consider Lloyds TSB
Corporate Markets when looking at
asset based lending?
Lloyds TSB Corporate Markets has over 30 years of
experience funding different types of assets across
a range of industries.
Lloyds TSB’s Corporate Asset Finance team support
asset funding solutions between £250,000 and
£150 million.
Unlike most banks, Lloyds TSB has its own in-house
asset management team, allowing us to take
residual value risk on a wide variety of asset
classes. Customers can leverage Lloyds TSB’s
asset management team’s experience to make
the most out of their assets.
With integrated support from an in-house team of
lawyers, tax advisers, accountants and financial
modellers, we ensure that you benefit from short
sanctioning lines, quick response times and low
deal costs.
Meeting your Business Needs
“It is great to deal with a financing partner that is
independent from manufacturers, it gives us the
flexibility to both choose the equipment that best
suits our needs and to negotiate independently
with the manufacturers allowing us to reduce our
overall costs.”
John Campbell
Finance Director at Dickenson Dees
3
4. 4
Asset financing instruments are designed to support
the key financial requirements across the various
stages of your company’s life cycle.
Financing instruments can allow you to:
release locked in value from your business’ fixed
assets;
obtain an asset for a short- or long-term contract;
secure a new asset with minimal initial outlay to
preserve cash reserves;
provide funding or tax efficient structuring aligned
to your business’ specific accounting treatment
requirements;
potentially receive funds below the Bank of
England base rate in some instances by
incorporating tax benefits into the structured debt;
access varied sources of funding to avoid using
cash reserves or bank credit lines;
work with a financial partner who can more
effectively leverage capital allowances you would
otherwise not enjoy and build these into your
repayments; and
easily and cost-effectively dispose of, or upgrade,
an asset.
Leasing adds an extra level of flexibility and choice that
straight debt may not.
We work with the client to understand their accounting
and balance sheet practices to structure the right
financing options for your company. For example, a
structure may be treated as an operating lease by
your auditor and would therefore be off-balance sheet.
An example of the features of the core leasing
instruments follows:
Asset Financing
The following pages will explore the benefits and
details of some of the various funding and purchasing
options available to your business further.
Product
Hire Purchase
Capital
Allowance Claim
Client
Legal Ownership
(end)
Lessor or Client
Return
Option
Usually kept
by client
Balance Sheet
Treatment
Finance Lease Lessor Lessor Lessor decides
Long-Funded Lease Client Lessor Lessor decides
Operating Lease Lessor Lessor Yes
Discuss with your
auditor for us to
build the structure
around your
accounting practices
6. Businesses looking for immediate use of a new asset
but with a minimal initial financial outlay should
consider a Finance Lease.
The Finance Lease is a simple approach to lease
funding designed to provide a deferred payment plan
on the acquisition of any asset.
The business selects and negotiates the asset
themselves, we then purchase from our client or we
can appoint the client to be our undisclosed agent in
the purchase. We will provide 100% of the purchase
price of the asset in return for a fixed periodic sum
agreed at the beginning of the lease. You arrange the
delivery directly with the supplier prior to the start of
the lease – leaving you in complete control of getting
the assets into operation.
Competitive repayment rates – When it is not a
Long-Funding Lease, Lloyds TSB can claim the
capital allowances and build these into the rental
structure providing competitive pricing to our client.
Deferred VAT payments – VAT is paid on your
rentals rather than the upfront purchase price,
which is covered by Lloyds TSB.
Operational benefits – Your business remains in
day-to-day operational control of the asset and the
asset generates income as you pay for it. As with
any other lease agreement, you return the asset at
the end of the period to the lessor.
Tax efficiencies – Positive tax structuring within
finance lease transactions can often provide
sub-LIBOR financing.
Finance Leases
6
7. Capital Allowances
Capital allowances are tax allowances available on
certain assets or investments. These allow you to
deduct a proportion of these costs from your taxable
profits and thereby reduce your tax payments.
The structure of Finance Leases allows you to pass
over these capital allowances to the lessor, who will
then build these into your repayments. This is
beneficial to a wide range of businesses including
those who cannot claim such allowances themselves
or those who wish to have these allowances leveraged
more efficiently.
Industry Insight
“The Finance Lease is a simple approach to asset
funding. It is an especially powerful instrument for
businesses in a non-tax paying position. If your
business can’t utilise its capital allowances, it makes
sense for you to let someone else use them on your
behalf, realising the benefit of an attractive rental price.
“Often we are able to exercise these capital
allowances near our own financial year end, meaning
that those customers with the right tax structuring can
enjoy sub-LIBOR pricing. Offering our customers
funding costs that may undercut the Bank of England’s
base rate is a particularly compelling proposition and
goes some way to explain the growing popularity of
the Finance Lease.”
“The Lloyds TSB team delivered a flexible,
innovative product and maintained the highest
levels of service throughout the process.”
Nick Castro
Group Finance Director of
Guardian Media Group
7
8. Case Study One:
Leasing to generate growth
The business need:
A successful UK–based hydraulics
manufacturing business wished to acquire
new machinery to improve its output,
thereby allowing it to qualify for tenders
against other leading manufacturers in the
competitive US market.
It required 100% funding of the purchase
price of the additional production line assets
as it wished to maintain its cash reserves to
use tactically as new opportunities
presented themselves.
It also needed to tailor its repayments to
secure the most cost-effective rate to meet
its own cash flow restrictions.
Lloyds TSB’s solution:
We provided Finance Lease funding to allow
the client to begin using the new machinery
immediately.
The manufacturer of the required machinery
for our client invoiced us directly when the
customer received the assets.
In accordance with the tax rules at the time of
signing, the client retained the option to
either extend the lease of the machinery at
the end of the term for a minimal cost
(peppercorn payment) or to sell the asset and
receive the majority of the sale proceeds.
The flexibility of the Finance Lease structure
put in place means that the business can
take a view as to how cash-rich it is in five
years time and whether it needs to continue
to use a lease-based structure or if it is in a
position to purchase new assets outright to
meet the demand generated by their uplift
in production.
Case Study Two:
Working the capital allowances
The business need:
A UK packaging company required a tax
efficient way to purchase a new packaging
line.
The client was able to claim capital
allowances on the assets and so needed a
partner who could leverage any allowances
to the client’s benefit.
The client brief included a requirement to
spread the repayments over a fixed time
period and to avoid an initial outlay for both
the purchase price and the VAT.
Lloyds TSB’s solution:
A package of competitive rate coupled with
taxation benefits to us and then passed
onto the client resulted in a reduction in the
customer’s expected monthly repayments.
VAT payments were calculated from the
monthly rentals rather than the purchase
price, freeing up crucial funds and reserves.
The company now has a transparent rental
payment structure, simplifying the budgeting
process.
The Finance Lease in action
8
10. Businesses looking to minimise the impact of new
equipment or asset acquisition on their cash flow
should consider alternatives to straight-out loan
financing or cash purchasing.
One increasingly popular alternative is the operating
lease – a lending instrument designed to provide:
Flexibility – beneficial cash flow and balance
sheet treatment.
Cost Efficiency and Improved Profitability –
providing cheaper lending commitments
compared to vanilla debt alternatives.
Tax Efficiency – allowing you to consider taxation
legislation and to realise tax efficiencies in the
purchase.
Security and Operational Benefits – giving you
the option to return the asset at the end of its lease
period, making it the ideal choice for those looking
for funding of assets for project or contract work or
locking-in to predetermined depreciation curves.
The Operating Lease allows you to identify the asset
you need, negotiate the price and then arrange for the
lessor (finance company) to purchase it from the
manufacturer or previous owner. The lessor builds in a
residual value – a guaranteed future value – which
reduces the capital and associated interest charged
over the agreed period on the principle borrowed,
bringing with it the benefit of reduced amortisation
and consequential lowering of the interest charge thus
providing improved cash flow to your business.
If you require an asset for only a short period of time,
such as for plant equipment to carry out a project or to
allow you to operate an ‘on demand’ production
model, an operating lease is ideal. It’s also well suited
to finance:
Construction equipment
Production machinery
Transportation assets
Food and beverage production
Print machinery
Packaging equipment
Engineering process plant
The flexibility of this approach means that Lloyds TSB
can buy the asset directly from the supplier using an
undisclosed agency agreement with your business,
or we can acquire it from you on a sale-and-
leaseback basis.
Operating Leases
10
11. Improving your profitability
An operating lease can help your financial model:
The rental payments are lower than alternative
finance options and take into account the residual
value of the asset, which improves your cash flow.
Subject to your auditor’s approval and advice, you
may have the ability to treat the asset and
associated funding as being Off Balance Sheet.
As the owner of the asset, we’ll claim the writing-
down allowances and reflect this in your reduced
rental costs.
Your rental costs are normally offset against
taxable profit which means you should be able to
reclaim the VAT payable on the rentals.
If the asset is sold for less than the residual value
assumed by us, we’ll bear that cost.
Providing you with operational benefits
Along with improving your profitability, an operating
lease also brings benefits for the running of your
business:
Depending on the taxation treatment of the lease,
you can use the asset for precisely as long as you
need it – at the end of the agreed funding term,
you can either return it to us or sell the asset on
our behalf.
We can structure the funding term and rental
payments to match the income generated from the
new asset to minimise the cash flow impact.
While you won’t own the asset, you will profit from
the practical benefits of ownership without the
worry of depreciation or resale value.
Industry Insight
“When considering if an Operating Lease is the right
funding instrument for your business, it is important to
look at the whole economic life span and cost of an
asset. This means looking at how much the asset
costs to acquire, how much it will cost to run, what the
rate of depreciation is likely to be and what the final
disposal/sale value may be.
“If you need the asset to support contract work, an
Operating Lease is a perfect fit. You get to use the
equipment and the bank takes it back at end of the
predetermined period. While there is an associated
lower cash-flow for that piece of equipment, you
benefit from the fact that you can utilise the asset for
the purpose of the contract, bringing forward the
monies you make as part of the project.
“One of the main attractions of the Operating Lease is
that the choice of what you wish to do with it firmly
rests with you. It empowers you to engage as you feel
fit, putting you firmly in the driving seat.”
“We sat down with the team and worked out
what we really needed to achieve, the solution
that we were offered made a lot of sense and
benefited our business’ bottom line.”
Paul Massey
Corporate Finance Director of
Liberata
11
12. Case Study One:
Funding the production line
The business need:
One of the leading soft drinks producers in
the UK required funding of business critical
equipment that balanced both financing
and operational requirements.
The client wanted a customised solution that
optimised the use of their balance sheet.
The client needed to find an asset finance
provider that could share experience and
knowledge through the complex taxation
and legislative changes.
It also needed to obtain a financial product
that offered flexibility and transparency at all
times.
Lloyds TSB’s solution:
Lloyds TSB Corporate Markets asset finance
team drew upon its flexible offering in the
financing of manufacturing equipment to
finance a bottle-blowing and packing line.
We guided the customer through the
process, working with them every step of
the way.
We took a significant residual value
investment in the asset.
Case Study Two:
Securing corporate transport
The business need:
A leading UK retailer required a brand new
mode of cost and time effective transport for
its senior executives.
They were looking for a financial solution
that maximised the future value of this asset.
Client wanted an expert advisor with
demonstrated expertise in the area of
corporate aviation finance.
They needed to find a finance provider that
could hold their hand through a detailed
legislative process.
Lloyds TSB’s solution:
Lloyds TSB Corporate Markets drew upon
their mature offering in the financing of all
modes of transport.
We were able to take a significant residual
value investment in the asset and on a
combined tax and debt basis.
We turned the deal round rapidly, far
exceeding the customer’s expectation of
execution they had experienced with other
lenders.
We provided Operating Lease asset finance
for a Corporate to meet their specific
transport requirements.
The Operating Lease in action
12
14. Sale and Leaseback, as way of introducing this option,
is a method of purchasing – not a method of finance.
The featured benefits of operating and finance leases
all apply depending on the way we construct the
structure to suit your business’ needs. It is just another
way we make complex financial solutions simple.
In other words, a Sale and Leaseback purchase option
can have the attributes of a finance or operating lease
depending again on what you and your business’
needs are.
Businesses planning to expand their operations
without tying up their cash flow in the process should
consider Sale and Leaseback.
This purchasing option is a flexible tool in a treasurer’s
or financial director’s tool kit. It gives your business the
flexibility to put previously purchased assets onto a
lease structure. There is taxation considerations
associated with this option in so far as the assets to be
leased cannot be more than 4 months old.
Sale and Leaseback is a funding option that is well
suited to any business looking to free-up capital and
value out of recent and new asset purchases.
Sale and leaseback allows you to sell your asset to
your bank and receive an immediate cash injection
into your business, leasing it back from us, allowing
the client to remain in day-to day control of the asset.
In short, it makes your working capital work harder.
Benefits to your business
Flexibility – Sale and Leaseback is a purchasing
option that can sit alongside all other leasing
instruments.
Releasing locked-in value – it allows you to
exercise capital and value out of an asset.
Tax deductions – depending on the type of lease
you ask us to structure for you will determine the
relevant taxation elements – in certain
circumstances the structure allows us to make the
capital allowances and building these savings into
the rentals payable by your business.
Operational benefits – your business remains in
day-to-day operational control of the asset. As this
is a purchase option, not a funding option, the
same return or purchase conditions apply to
finance or operating leases.
Sale & Leaseback
14
15. Tax-based leases: releasing value from
existing and older equipment
Sale and Leaseback has different dynamics from a
straight finance lease because it is often deployed to
finance equipment that has recently been acquired
directly by the company prior to lease finance options
being explored.
There are definitive legislative tax rules surrounding
what assets can be financed through Sale &
Leaseback. Our internal team of tax advisors, lawyers
and accountants can provide guidance on these rules
through your relationship manager.
Tax-based leases are attractive to lessor and lessees
alike as they allow the lessor to benefit from tax
depreciation as owner of the asset and to then build
these benefits into the rentals payable by the lessee.
What types of asset can be financed?
Within the four month period following purchase, any
asset or equipment can be funded at the full, un-
depreciated value of the asset.
Industry Insight
“Sale and leaseback is well suited to any business
looking to free up capital and value out of existing
assets. It is also a popular choice for companies
seeking to batch together multiple asset purchases
into a single transaction for simplicity and cost
management rather than through a series of individual
funding agreements.”
15
16. Case Study One:
Expansion of delivery fleet
The business need:
A well known service business recently
acquired additional delivery vans.
The client’s motor fleet was required to meet
their increased servicing of a geographical
area, a result of customer demand and their
reputation in the market of providing
excellence in customer service.
Lloyds TSB’s solution:
Details of the vehicles to be financed were
sent to us.
Once the vehicles were transferred from the
client a lease agreement activated.
The business enjoyed the benefits of
immediate use of the asset whilst also
enjoying a much lower payment than would
be expected under a basic ‘business loan’
arrangement.
Residual value was taken in the vehicles by
Lloyds TSB Corporate Markets and thus the
customer had the benefit of only paying
finance on the outstanding value between
purchase price and residual value.
Case Study Two:
Replacing aging ‘yellow goods’
The business need:
A well established construction company
wished to replace its aging fleet of yellow
goods.
These included a range of equipment such
as excavators, rollers and tip trucks.
The company had clear ideas of what
specific equipment they required and also
wished to remain in control of the ordering
process.
Lloyds TSB’s solution:
We were able to establish a direct
relationship with both the supplier and
the client.
The client liaised with the supplier directly for
the delivery and specifications of each yellow
asset, thus reducing the administration of
including us in the negotiations.
The client showed us copies of the supplier
invoice to show title passing. The client then
invoices us.
Again, the business case for the Sale and
Leaseback when compared to straight debt
(e.g. business loan) for the same goods over
the same period impressed the client.
The customer was impressed by our
approach which further demonstrated
Lloyds TSB Corporate Market’s commitment
to building a solution to the business
challenge and situation, not forcing a
product to fit the situation.
Sale & Leaseback in action
16
18. Businesses that require long-term lease financing and
wish to claim capital allowances on the assets should
consider a Long-Funded Lease.
Long-Funded Leases can be either finance leases or
operating leases, depending on the detail of the
requirements and structure.
A Long-Funded lease is any lease (finance lease or
operating lease) greater than 7 years. Additionally,
there are certain tests that need to be applied to
leases between 5 and 7 years to determine whether
those leases are considered Long-Funded Leases as
defined under the UK government’s tax regime. These
tests are related to the amortising, or writing down,
profile of the assets to be leased.
Long-Funded Leases
18
19. Benefits to your business
Capital allowances – Long-Funded Leases allow
businesses to claim their own capital allowances
rather than passing them to their lessor.
Deferred VAT payments – VAT is paid on your
rentals rather than the upfront purchase price,
which is covered by Lloyds TSB.
Flexibility – Ideal for businesses that have balance
sheet limitations or constraints.
Operational benefits – Your business remains in
day-to-day operational control of the asset and the
asset generates income as you pay for it. As with
any other lease agreement, we decide at the end
of the agreement the disposal of the leased asset
be it returned to us or sold.
Long-Funded Leases are also well suited to finance:
Longer-Term Contract-Specific Assets –
specifically assets purchased for fixed-term
contracts where the asset is not required once the
contract has been delivered.
Upgraded Technology Assets – undertaking a
technical upgrade of your equipment or ‘retiring’
equipment that is no longer leading-edge.
Industry Insight
“For all intents and purposes, Long-Funded Leases
have very much ‘debt-like’ qualities. As the capital
allowances are transferred to the lessee these lease
structures seem a lot like a Hire Purchase agreement,
although many of the nuances remain, such as the
lessor being the owner and thereby paying the VAT.
“There is often a higher degree of flexibility provided by
these leases. A Long-Funded Operating Lease with the
correct structure, for example, can allow the lessee to
both claim capital allowances and still have an asset
off-balance sheet. In the US this is often referred to as
a ‘Synthetic’ as it has some hybrid facets around it.”
19
20. 20
Case Study One:
Structured refinancing to leverage
capital allowances
The business need:
One of the country’s largest dairy
manufacturers was looking to refinance
assets transferred from other dairies to a
recently acquired UK-based dairy.
The net book value of the assets was
£18million, with an average equipment age
of 6-10 years, and the desire was to raise
£10million against these assets.
The client needed to achieve both Long-
Funding Lease status to claim the capital
allowances and a structured lease to meet
the cash flow and production ramp-up that
would come as the dairy went into
operation.
Lloyds TSB’s solution:
Lloyds TSB Corporate Markets was able to
provide a valuation of the assets internally.
We developed an innovative customised
leasing product based on the new tax
legislative changes using internal taxation
and legal expertise.
We created an annual in-advance lease
structure with escalating rentals to remain
within legislative tolerances.
The structure met the customer’s cash flow
requirements and all documentation was
completed within a month.
Case Study Two:
The Long-Funded Operating Lease
The business need:
A truck operator wished to purchase a new
range of vehicles for their UK operations.
The terms of their operating contract and
covenants determined that they could only
legally employ vehicles which were a
maximum of 7 years old.
Lloyds TSB’s solution:
We advised our client to establish a Long-
Funded Operating Lease with us to meet
their brief.
At the end of the 7 years of operation the
used trucks will have considerable residual
value with an economic life of 10-12 years.
We can then manage their resale to the
secondary truck market to owner operators
without the same operating covenants.
The value of the sale will allow the truck
company to refresh their funds and invest in
a fleet of newer trucks.
Long-Funded Leases in action
22. As your business’ requirements become more
complex, there are occasions where the most suitable
way to finance expenditure may be through a
structured loan or receivables-based product.
This type of financing is often used where the
underlying payment stream generated over time within
a business is used to create a cash sum to fund
capital expenditure now, and where additional
flexibility is required in respect of the assets being
financed.
For example, structured loans are often used where a
business chooses to outsource part of their operations
to a strategic partner who will run and manage this
part of their business. Outsourced assets such as
technology hardware and software, waste
management equipment and commercial vehicle
fleets, can be purchased today by raising finance
against future committed payments streams from the
end customer.
Benefits to your business
Accounting Treatment – the greatest benefit to
structured loans and receivables is the ability to
fine-tune the construction of the finance solution to
best suit your business’ accounting practices and
with your auditor’s approval potentially treat the
assets as being off balance sheet.
Asset Flexibility – allows most types of business
assets to be financed, with the ability to substitute
assets over the life of the agreement.
Operational benefits and geography – provides
the ability to locate assets globally without
potential restrictions on geographical location.
Tax neutrality – the parties can structure the
transaction to allow any potential tax allowances
to sit with the party who can take most benefit.
Constraint-free at end of financing – your
business (or your outsourcing partner) remains in
control of the assets throughout the financing
period, and has no constraints at the end of this
period, to carry on using the assets or dispose of
them as appropriate.
Structured Loans & Receivable Based Financing
22
23. Flexibility and innovation: to help you
create value within your business
Structured loans and receivable-based financing has
evolved to find creative solutions for transactions
where a business primarily needs flexibility around
how their business critical assets are financed.
These types of structures are complimentary to more
traditional lease finance, providing a route where the
payments made by the customer are often embedded
within another operational contract.
These structures are attractive to customers who
recognise the business value of these assets, but do
not necessarily want to enter into a tax-based, or UK-
centric agreement.
The financing solution is matched to ensure that the
term of the facility, the payment profile, and frequency
closely match the benefits which accrue from the
underlying assets, allowing the business to use an
efficient tailored solution to meet their financing needs.
By their nature, structured loans and receivables
financing are often used for larger transactions where
structuring tools can be used most effectively.
Industry Insight
“Receivable based financing and structured loan
products have been used for a number of years to
create flexibility for customers, and continues to grow
in popularity. These financing routes are best suited
when the customer requires additional flexibility in
choosing the assets being used (and replaced) over a
period of years, and in the choice of the countries
where those assets might be located.
“It is also used where the tax benefits which flow from
lease financing are not available or appropriate either
because of the term of the transaction, the type of
assets, or their location.”
23
24. Case Study One:
Structuring for growth
The business need:
A well known media company wanted to
finance new technology infrastructure.
The management of these assets was going
to be undertaken by a third party who
would have an on-going managed services
contract.
The assets were going to be bought over
time as the project reached certain
milestones, and as each milestone was
reached then these assets would need to
be funded.
Lloyds TSB’s solution:
Lloyds TSB Corporate Markets entered into a
receivables agreement with the managed
service provider where we gave our
commitment to fund the project over the
roll-out period.
The underlying agreement between the
customer and the managed service provider
was structured so that the payment stream
within the agreement was sufficient to cover
the upfront cost of the assets.
Once the milestones were reached, Lloyds
TSB paid the cash across to the service
provider for the underlying assets, and the
payment profile was sold to Lloyds TSB.
At the end of the financing period, the
customer and his managed service provider
have complete flexibility in the continued
use (or disposal) of the underlying assets.
Case Study Two:
Utility use of receivables
The business need:
A water company had designed its own
billing system and therefore owned the
Intellectual property Rights (“IPR”) to the
software.
The company was looking at passing over
the management of its billing system to a
third party.
The billing system and the issuance of the
bills to the company’s customers was being
transferred to the third party.
The third party wanted to buy the billing
system but did not want to have the initial
cash outlay.
Lloyds TSB’s solution:
The billing system IPR was sold to the third
party, who entered into a sale and leaseback
agreement with the water company.
This allowed the water company to have
the certainty that at the end of the contract
it would be able to regain title to the
billing system.
In addition the water company could take
the capital allowances available on the asset.
Lloyds TSB Corporate Markets provided a
structured loan secured against the
underlying agreement, allowing the asset to
be financed, and all parties’ needs to be met.
Receivables and Structured Loans in action
24
26. With ever increasing security concerns and scheduling
constraints in the commercial aircraft markets the
Corporate Aircraft is now seen as a valid business tool.
Flexibility in time and routing adds to the effectiveness
of getting your company’s senior management team
to business commitments fast and reliably. Your
business may benefit from having an aircraft at its
disposal, as opposed to legal ownership and this is
where we as your financing partner can really make a
difference.
We are able to offer a wide range of solutions for
funding corporate aircraft ranging from structured
debt, such as an aircraft mortgage right the way
through to an operating lease.
Understanding the asset is key in this regard and we
have an in-house team of experts specialising in
equipment management that allows us to take a
residual value risk in the asset, therefore providing
your business with either a structured finance
arrangement with limited financial recourse. These
structuring tools give our clients all the benefits of use
without the cash or balance sheet constraint of an
outright cash purchase.
Corporate Aircraft Financing
Case Study One:
Corporate Aircraft Financing
The business need:
A major UK-based retailer with stores
throughout the country required ease of
access to the regions for store openings and
to monitor their aggressive growth strategy.
The company’s senior executive team
travelled regularly to regional areas not
serviced by main or central airports.
Airline schedules and connections resulted
in lost time and productivity of senior
executive team.
The client analysed their own plane and
realised it would reduce costs and lost time.
Lloyds TSB’s solution:
We acquired a corporate jet for the
customer through a structured finance
arrangement.
Although unfamiliar financial and asset
territory for this customer, we delivered the
solution rapidly and exceeded their
expectations.
Our internal team of lawyers, equipment
managers and taxation advisers were
able to provide a complete financial and
asset management solution that delighted
our client.
“Lloyds TSB’s Corporate Asset Finance team has a
well earned reputation for specialist expertise in
aircraft asset financing.”
Blake Fizzard
Vice-President of Financial Structuring at
CHC Helicopter Corporation
26
28. Please get in touch with one of our regionally-based
corporate asset management and finance experts to
find out how Lloyds TSB can tailor an asset finance
solution to your business needs. They will take the
opportunity to sit down and listen to your
requirements, circumstances and needs. They will then
be able to discuss the various options open to you,
structuring a solution to address your business asset
and growth needs.
Our team consults on all forms of asset acquisition
enablers, including:
Finance Leases
Hire purchase
Operating Leases
Sale and Leaseback
Structured Loans & Receivables
For more information or to set up a meeting to discuss
your corporate asset finance needs, please contact
your Lloyds TSB Corporate Markets relationship
manager or your local office:
Corporate Asset Finance Offices
Northern England
6-7 Park Row
Leeds LS1 1NX
T: 0113 237 2138
Central England & Wales
125 Colmore Row
Birmingham B3 3SF
T: 0121 625 6534
London & Southern England
10 Gresham Street
London EC2V 7AE
T: 020 7158 2605
Scotland
180 West George Street
Glasgow G2 2NR
T: 0141 341 5925
E: asset.finance@lloydstsb.co.uk
W: www.lloydstsb.com/corporatemarkets
How Lloyds TSB can support you
28
Best Bank in the UK 2007Corporate Bank of the Year
2005, 2006, 2007
29. Aircraft Mortgage – A loan facility with a fixed charge
over the aircraft as an asset.
Cross Border – structured finance solution delivered in
more than one national jurisdiction and in the currency
of the local market and the lending banking.
Direct lease – You identify the asset and negotiate the
price, then arrange for the leasing company (Lessor) to
buy it and subsequently rent it to your business as the
end-user. (see also sale-and-leaseback)
Economic life – or useful life is the period of time
during which an asset has economic value and is
usable.
Finance Lease – A capital lease that serves to finance
the acquisition of property/ equipment. This is a full
payout lease and can only be cancelled through
negotiated termination clauses. In other words, the
lessee has to insure the equipment, pay the taxes and
arrange for its maintenance.
Hire Purchase – A hiring agreement with an option
for the hirer to purchase the goods at the end of the
hire period for a nominal figure.
Lease – A lease is a contract in which the lessor
purchases the asset selected by your business and
conveys the use of an asset to the business for a
specific period of time at a predetermined rate.
Lease Rate – The periodic rental payment to the
lessor for the use of the asset. The lease rate is
primarily determined by the total cost of the asset, the
duration of the lease and the interest rate level.
Lessee – The lessee is the user of the asset being
leased, i.e. your business.
Lessor – The lessor is the party who has legal or tax
title to the equipment, grants the lessee the right to
use the equipment for the lease term, and is entitled to
the rentals, i.e. the leasing company.
LIBOR – (London Interbank Offered Rate) is the interest
rate at which banks borrow funds from each other in
wholesale money market known as London interbank
market.
OEM (Original Equipment Manufacturer) – The
manufacturer of the goods that are to be covered
under the structured debt arrangement.
Operating Lease – A lease where the lessee’s
payments do not cover the full cost of the asset. The
operating lease is classed as a true lease (USA). The
lease is normally for a period which is shorter than the
asset’s useful life and the lessor retains ownership of
the equipment during the lease term and after it
expires. Anticipated maintenance and other costs can
also be built into the rental payable by the lessee.
Purchase option – A provision by which you have the
right to purchase the asset at the end of the lease
term, either at a predetermined amount or its fair
market value.
Residual value – The resale value of the asset at the
end of the lease.
Receivables – are the amounts of money owed to a
company, whether or not these are currently due.
Sale-and-leaseback – also called purchase
leaseback, is where your company sells an asset it
already owns to the leasing company for fair market
value or book written down value (whichever is less)
and then lease it back (see also direct lease).
Structured Lease – A lease where the rentals payable
by the lessee are tailored to match the cash flows
generated by the assets under lease. Can apply to
seasonally used assets e.g. combine harvesters or
charter aircraft etc.
Tax Lease (Tax-based Lease) – A lease where the
lessor benefits from tax depreciation as owner of the
assets and builds these benefits into the rentals
payable by the lessee.
VAT – Value added tax is a sales tax levied on the sale
of good and services as determined by the UK
government’s tax regime.
Glossary
29
30. Disclaimer
Lloyds TSB Bank plc (“LTSB”) has exercised reasonable care in preparing this document and any views or information expressed or presented
are based on sources it believes to be accurate and reliable, but no representation or warranty, express or implied, is made as to the
accuracy, reliability or completeness of the facts and data contained herein. This document has been prepared for information purposes only
and LTSB, its directors, officers and employees are not responsible for any consequences arising from any reliance upon such information.
If you receive information from us which is inconsistent with other information which you have received from us, you should refer this to your
LTSB Sales representative for clarification.
This document does not constitute legal, accounting or taxation advice and you should always obtain your own independent advice. Nor do
we represent or warrant that any documentation produced by us will be the same in its terms and conditions as those described in this
brochure. Case studies and descriptions are by way of example only and you should read any documentation which we produce to ensure
that it meets with your business’ requirements.
Lloyds TSB Corporate Markets is a trading name of LTSB. LTSB’s registered office is at 25 Gresham Street, London EC2V 7HN and it is
registered in England and Wales under no. 2065. LTSB is authorised and regulated by the Financial Services Authority.