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Meeting the challenge of growth in Asset Based Lending

Meeting the challenge of growth in Asset Based Lending

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Meet the challenge of business growth

Providers across a range of disciplines are looking for significant, sustainable, profitable organic growth. Delivering this profitable growth has never been easy and today is even more demanding.

This paper looks at some of the challenges facing businesses where the financial and service solution is centred on assets. The field is wide and covers asset finance, receivables finance, trade finance, real estate, project finance, vehicle and fleet management and structured finance. It looks mainly at B2B but also at B2C and the public sector.

It references Mercuri’s ABL industry survey to highlight
key challenges, opportunities and perceptions and
indicates some of the ways organisations and
individuals can achieve the success they seek.

Read this short paper and then tell us what you think?

Mercuri International help you to win, manage and grow customers better. We have been helping companies implement strategies and achieve powerful sales results for over 50 years, with an international team of 500 people in 50 local offices around the world.

Our clients and our industry recognise we are experts in sales. We want to meet you. Mercuri International is featured on both Training Industry’s and Selling Power’s Top 20 Sales Training Companies list.

We want to speak with you.
Call Mat on 07572 343 341 or matthew-everitt@mercuri.co.uk

You can learn more about Mercuri here;
http://mercuri.net/our-vision-mission-and-core-values

http://mercuri.co.uk/how-can-mercuri-international-help

http://www.slideshare.net/MatMercuri/how-mercuri-help-you-improve-your-performance-65699011

Meet the challenge of business growth

Providers across a range of disciplines are looking for significant, sustainable, profitable organic growth. Delivering this profitable growth has never been easy and today is even more demanding.

This paper looks at some of the challenges facing businesses where the financial and service solution is centred on assets. The field is wide and covers asset finance, receivables finance, trade finance, real estate, project finance, vehicle and fleet management and structured finance. It looks mainly at B2B but also at B2C and the public sector.

It references Mercuri’s ABL industry survey to highlight
key challenges, opportunities and perceptions and
indicates some of the ways organisations and
individuals can achieve the success they seek.

Read this short paper and then tell us what you think?

Mercuri International help you to win, manage and grow customers better. We have been helping companies implement strategies and achieve powerful sales results for over 50 years, with an international team of 500 people in 50 local offices around the world.

Our clients and our industry recognise we are experts in sales. We want to meet you. Mercuri International is featured on both Training Industry’s and Selling Power’s Top 20 Sales Training Companies list.

We want to speak with you.
Call Mat on 07572 343 341 or matthew-everitt@mercuri.co.uk

You can learn more about Mercuri here;
http://mercuri.net/our-vision-mission-and-core-values

http://mercuri.co.uk/how-can-mercuri-international-help

http://www.slideshare.net/MatMercuri/how-mercuri-help-you-improve-your-performance-65699011

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Meeting the challenge of growth in Asset Based Lending

  1. 1. www.mercuri.co.uk For more information contact: Tel: +44 (0) 330 9000 800 Option 3 or ukfinsec@mercuri.co.uk THE CHALLENGE OF WINNING, GROWING & KEEPING CUSTOMERS IN ASSET-BASED LENDING A Mercuri International White Paper Page 1 (4) Meet the challenge of business growth Providers across a range of disciplines are looking for significant, sustainable, profitable organic growth. Delivering this profitable growth has never been easy and today is even more demanding. This paper looks at some of the challenges facing businesses where the financial and service solution is centred on assets. The field is wide and covers asset finance, receivables finance, trade finance, real estate, project finance, vehicle and fleet management and structured finance. It looks mainly at B2B but also at B2C and the public sector. It references Mercuri’s ABL industry survey to highlight key challenges, opportunities and perceptions and indicates some of the ways organisations and individuals can achieve the success they seek. Opportunity for growth After a challenging period over recent years, there are two drivers for growth that can be identified. One could be described as a positive, the other as negative. Firstly as the economy recovers several sectors are seeing significant growth. The appetite for working capital is undoubtedly growing. In Mercuri’s last ABL survey 93% of respondents (ABL providers) either strongly agreed or agreed with the statement “the demand for ABL solutions is growing.” ABFA states that average use of ABL grew 9.4% in the year 2013/14. Secondly the traditional sources of finance for many businesses – the bank overdraft or term loan have shrunk as banks have sought to change their risk profile and enhance their return on weighted assets. So while competition is intense (witness the TV advertising campaign from Bibby) the opportunity for growth there to be seized. Shifting perception of ABL . The perception of ABL has shifted significantly since the Financial Times suggested in August 2013 that a lingering fear of asset-based lending was holding back SMEs. ABL, particularly receivables financing, used to be seen as ‘lending of last resort’ and there was a fear Two drivers for growth
  2. 2. Winning growing and keeping clients Page 2 (4) In Asset-based lending. CONT. www.mercuri.co.uk For more information contact: Tel: +44 (0) 330 9000 800 Option 3 or ukfinsec@mercuri.co.uk that customers could be concerned about security of supply if their supplier was seen to be using factoring for example. ABL is now seen as a mainstream and professional way of funding growth by many FDs and advisors. They see ABL as part of their overall financial solution. The key for ABL providers is to help customers to avoid potential stigmatisation in the way that funds are provided, for example the shift from overt factoring to confidential invoice discounting being a prime example. The perception is clearly shifting to that of a holistic source of working capital by optimising assets at competitive rates. Packaging ABL 62% of industry respondents to Mercuri’s 2014 ABL survey believed that their clients see ABL as part of an overall financial solution, rather than a stand-alone product. To package facilities in this way requires an active, pro-actively managed contact network. For ABL providers who are part of large institutions, the ABL professional must be seen as part of the client relationship team with an appetite for sharing in ongoing client funding. This requires internal alignment between sales and risk management, specialists and generalists. There is also a debate to be had as to whether ABL is a “wedge” product to acquire “new-to-bank” business and open up the wider banking relationship; an “ancillary” product offered only to existing bank customers or a stand-alone offering. For independent providers, an external contact network of finance professionals is critical in order to be involved in transactions where ABL is an integral part such as mergers, acquisitions, MBO’s and MBI’s. Differentiation in ABL As opportunity increases so does competition. More competition requires stronger differentiation and this can be difficult in an industry where the culture has tended to be one of differentiating on rate and stretching the % lent against asset value. The opportunity to differentiate is there to be seized. For some it has been through service levels, for others it has been through increasing the focus on end-of- lease and environmental issues. Brand differentiation is playing a bigger part in ABL with changing relationships with the “mother brand”, the emergence of the challenger banks positioning themselves distinctively in the market place and the emphasis on client segmentation by some players. Our research consistently tells us that organisations place high value on suppliers who understand their customer’s business and therefore how and where they can add value. Interestingly, 62% of our respondents held the view that clients value a consultative approach rather than just a technical explanation. This resonates with the 65% who believe that the way ABL providers sell differentiates them from their competitors and echoes the insight from Harvard Business review that we operate in “A world where companies compete not on what they sell but on how they sell it” (HBR 12/04 “Best Face Forward” Rayport and Jaworski) FDs and their advisors now see ABL as part of their overall financial solution “A world where companies compete not on what they sell but on how they sell it”
  3. 3. Winning growing and keeping clients Page 3 (4) In Asset-based lending. CONT. www.mercuri.co.uk For more information contact: Tel: +44 (0) 330 9000 800 Option 3 or ukfinsec@mercuri.co.uk Value versus price in ABL Our survey revealed that 82% of providers believe that clients are increasingly looking for overall value rather than just the lowest price. Yet still we hear daily stories of margins cut to the bone under competitive pressure. The key is to understand how the client defines value and align your offer accordingly. For some, value is derived in having providers that are easy to deal with and do not take up valuable management time. Others may place high importance on matching funding to cashflow, for example using seasonal payment profiles. Understanding of the key drivers, at both organisational and personal levels, enables the focus to move away from price and reduces the risk of commoditisation. We are seeing an increasing demand for a new approach to negotiation which moves away from an antagonistic focus on rate and moves towards a more collaborative approach to value. This does imply we go “soft” when negotiating. It does require that we become more effective negotiators. Customer-centricity There is a further significant opportunity for differentiation here. Customer centric selling approaches are right at the top of the agenda for many of Mercuri International’s financial sector clients. This is often being driven by the need to manage regulatory and reputational risk but some are seeing customer- centricity as a real opportunity. For them achieving “fair customer outcomes” is not a burden but a chance to stand out from the crowd. The opportunity is very real because while 95% of respondents agreed or strongly agreed that “Clients and regulators expect an increasingly “client centric” approach” only 60% felt that their selling approach is best described as “needs first solution second”. This suggests that almost half are still in an outdated product-pushing, transactional mode. ABL growth balanced with risk Another trend we would highlight here is the tension that many ABL providers experience in balancing their business development and growth objectives against prudent and sustainable risk management practices. 50% of our respondents were either neutral to or disagreed with the statement that ‘selling is fully integrated with risk and credit’. In a 2013 Deloitte survey, financial services companies said that embedding leading risk management processes in their organisation was important for sustainable growth so getting this balance right is critical for future success. Top performers in this area involve risk managers early and continuously so that deals can be shaped from the start of the customer engagement process. This also requires that sales professionals can understand and articulate the customer situation accurately and succinctly. What’s to be done? These challenges and opportunities are real, significant and difficult to address; but the prizes from addressing them successfully are great. Based on our experience of the most successful financial services organisations, combined with strong and transferrable approaches used in other sectors, we highlight the following areas to concentrate on: Wide and strong business cases All this is only worth doing if it will build sustainable profitability. When forming the business case for any development programme consider not only the opportunity to grow income, margin and share but also The way we sell differentiates us from our competitors
  4. 4. Winning growing and keeping clients Page 4 (4) In Asset-based lending. CONT. www.mercuri.co.uk For more information contact: Tel: +44 (0) 330 9000 800 Option 3 or ukfinsec@mercuri.co.uk the need to manage the risk of losing existing business to competitors. Focus on the “white space” of opportunity but measure the risk of not improving. How much profit is being “left on the table”? What impact will this have on the business and individuals this year and beyond? What’s in it for all concerned? Make the case clearly and convincingly. Be clear about where you are Make sure you understand and agree where your people are before you start to make improvements. Then make sure that what you are looking to improve will really have a positive effect on your business. This will save money, time and reputation. As one business leader put it “We have based too many of our development decisions on guesswork and individual opinions. For the first time we are basing decisions on data and agreement.” Use what you’ve got Many of the businesses we work with already have good tools and approaches in place. They do not always need to develop something brand new but to make better and more consistent use of the resources already available. Only use the new when you need to but then use it boldly. Innovative delivery Deliver development using innovative approaches that make the most of peoples’ time. The use of approaches such as blended learning, bite-size modules, simulations, experiential learning and live case based events can make a huge difference in optimising time and RoI. Build implementation from the start Implementation is the difficult bit in any development programme. But it is vital. Plan the implementation early on. It is much more cost-effective and produces a much better result to build it in rather than “retro-fit” it. Focus on durability Plan ways to ensure any changes become part of business as usual. Measure the change and wherever possible document impact and Return on Investment. Conclusions We trust that this paper will have stimulated your thinking – confirming some points and challenging you to rethink in others. If this paper has resonated with you then Mercuri International is well-positioned to debate with you and then diagnose, design, deliver and deploy with you to ensure durability. An example: Subsidiary of European ABL specialist. Client growth programme focussed on skills and processes for identifying and engaging with high potential clients. The top 15% of clients were identified and income from this segment doubled over a two year period. To keep up to date with trends and practical ideas on client-centric business growth please visit http://client-centric-financial-selling.com

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