We are fairly fortunate in the UK when it comes to vehicle repairs. If a car breaks down, or if we need some maintenance work, we’re usually safe in the knowledge that we can claim through our insurance company and it will pay out. The process is unlikely to burn a hole in our personal pocket, but what about the companies that actually do the repair work?
In the automotive-repair sector, businesses commonly find themselves in the predicament of having to run premises, pay wages, order parts and complete work before being compensated by their associated insurance companies. This disparity in cash flow can cause all manner of issues, limiting body shops’ capacity to take on extra work and ultimately affecting us, their customers.
In this problem, a Leeds-based invoice-factoring company saw an opportunity. The firm – Smart Business Link (SBL) – has secured £3.5m in growth capital from BOOST&Co, which will be followed by a £20m accounts receivable facility. This investment will enable SBL to continue funding the invoices of its many automotive-repair clients, as well as helping the business to expand its portfolio.
SBL was founded in 2015, drawing on the wealth of experience amassed by its management team, who have worked across the automotive-repair supply chain. With knowledge gained from insurance companies, accident-management businesses, body shops and financial providers, the management team could see that there was a clear need for working capital for businesses in the sector.
SBL’s business model works on the basis that the company buys (and takes full ownership of) invoices from body shops, freeing up cash for the body shops, which cannot afford to wait for insurance repayments. But SBL has now encountered its own funding bottleneck. It cannot grow its ledger any further without an injection of working capital, which will enable the business to buy more invoices and take on larger clients.
BOOST&Co’s first accounts receivable deal
The venture debt facility will give SBL access to up to £3.5m, which the company will invest in growing its ledger – essentially, the number of invoices that it buys from its automotive-repair clients. As it increases this pipeline, SBL will be in a position to move over to BOOST&Co’s new accounts receivable product.
“This is the first deal where we’ll be using our traditional venture debt offer in conjunction with our new accounts receivable product,” says Ryan Sorby, principal at BOOST&Co. “SBL has already demonstrated a clear capacity for growth, which gives us the confidence to offer the facility.”
In as little as three months, SBL expects to have further capitalised on its current success, moving over from the venture debt facility to the accounts receivable platform, which could increase to as much as £20m.
“This dual offer felt like the right option for us,” says SBL’s chairman, Gary Smith. “BOOST&Co’s flexible lending, combined with Ryan’s strong understanding of our business and our sector, has resulted in a solution that addresses our current need for working capital but also accommodates SBL’s ambitions for growth.”
Meeting the demand for invoice factoring
The UK’s automotive-repair market is worth an estimated £3.5bn, accounting for around 4,700 body shops across the country. These carry out work for insurance companies, fleet-management businesses and accident-management firms, which currently rely on generic financers. SBL believes that the sector is not supported by a financer that understands its needs, and that its own tailored approach benefits all stakeholders within the supply chain.
Sorby suggests that the deep knowledge of SBL’s team is what sets the business apart from its competitors. “Although there are plenty of large factoring companies that work within this space, SBL truly understands the process of gaining approval from insurance companies, then gathering all the relevant documentation and packaging it up into something that insurers can process very easily.
“The response that SBL receives from its clients speaks for itself; they feel as though someone finally understands the nuances of the sector and can fund it accordingly, speeding up payment for all involved,” he says.
SBL’s customer base is currently concentrated on single-site to medium-sized automotive-repair companies, but with this boost of investment, its pipeline is set to expand substantially, with some national operators set to be signed up, too.
So don’t worry if your car breaks down – it’s a relief to know that the nation’s body shops are safe in SBL’s hands.