When a large commercial vehicle hire company suffered from the effects of an economic downturn and sales decreased significantly, this had a severe impact on the cashflow of the business.
With over 1,500 vehicles and many of them financed by way of hire purchase and leases, the contractual payments could not be met based on the reduced sales and cashflow that the company was facing.
A detailed financial model was produced to show the cashflow position based on the reduced sales, and from this position the amount of available cash for monthly payments to the Finance Companies was determined. Finance Companies were approached and advised of the situation, supported by the detailed profit and cashflow forecasts.
Negotiations were held with all Finance Companies who were providing total finance in the region of £30m. The majority of lenders accepted the position, and were happy to extend the terms of the agreements to allow full repayment but over a longer period. The last thing any lender wanted was to repossess their vehicles and have a forced sale situation as that would have meant crystallising significant losses. If a business is suffering financial hardship, lenders will always be happy to discuss matters where a pro-active approach is taken, simply not paying and not providing a solution as to the way forwards will mean that lenders may have to take a much harder line ultimately.