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| SHM Smith Hodgkinson set to redefine the asset based lending sector |
SHM Smith Hodgkinson, a Gordon Brothers company, and the UK’s leading auctioneer, appraiser and valuer of business assets is set to shake up the current market by offering leasing companies and asset based lenders a new, unique service.
Termed ‘Put Option Agreement’, the new product effectively provides a guarantee of the asset’s value in a time series or ‘residual appraisal profile’. This benefits the lender as it gives them the commercial equivalent of a ‘first loss’ cover of 20% of the prevailing value of an asset in the event of a loan or lease default. Currently, the lender would have to carry that risk.
In the event that a default occurs, SHM, as the remarketing agent, will sell the assets, or if unsuccessful, will either purchase the assets or, if the asset disposal fails to reach the expected value, pay the 20% first loss to the lender.
SHM have successfully trialled the put option agreement with leading asset based lenders in the UK.
Andrew Bullard, sales director at State Securities plc, a leading provider of asset based finance support to UK companies with over 25 years experience commented: “We noticed that our competitors were able to offer more against assets than we were and therefore we were losing out on potential business. We researched the market and found that SHM Smith Hodgkinson were more adventurous than our current valuers and their put option agreement product would allow us to engage in deals where currently we were unable to.
“As soon as we began work with SHM and utilised their put option agreement, we were able to increase the amount of our lending business. In fact, the level of business rose by a couple of million pounds in just six months. The new product has increased our business and allowed us to operate more flexibly in the market place without an increase of associated risk.”
Peter Jones, director, business development at Landsbanki Commercial Finance added: “SHM Smith Hodgkinson were differentiated in the marketplace by their innovative approach. The put option agreement reduces the bank’s risk and gives a clear indication of the ultimate exit strategy. It is clearly a favourable factor and one that is taken into account when making our final credit decision.”
Christian Humphreys, associate director, at SHM Smith Hodgkinson, Manchester commented: “It is clear that lenders are delighted with the unique opportunities that the put option agreement gives them. Asset based lenders and leasing companies can now strengthen their loan securitisation and define a managed exit from the loan in the event of a default.
“The put option agreement offers something unique in the current marketplace – it significantly reduces the risk and uncertainty through guaranteed valuations. The put option agreement is just one way that SHM Smith Hodgkinson demonstrates its focus and total commitment to its customers and to the market. We hope that customers continue to reap the benefits from our comprehensive range of finance solutions, and we look forward to working with them.”
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