One effect of the recession has been a reversion of lenders to their perceived “core” activities. A limitation of funds and a shortening of balance sheets have contrived to engender a reluctance to fund stock for vendors, dealers and retailers. This especially so where the investment is considered only secondary to retail support at the best - and risky at the worst – and where retail return has plunged during the recession.

So it is with stock/inventory finance at the present time. Several middle-ticket sectors are reportedly suffering from lack of stock funding, none more so than the print industry.

GE Capital has signed an initial £30m stock financing agreement with Swift group, the UK’s leading caravan maker.

GE Capital will provide a distribution finance facility expected to bring Swift some £30m in dealer stocking funds in 2010, rising to £60m in 2011.

Keith Hayward, head of unit stocking at Lombard

Sword Apak’s implementation of its wholesale finance system (WFS) with Lombard Asset Finance (Lombard) is first of its kind. Lombard, part of Royal Bank of Scotland Group, identified a potential market opportunity in the automotive finance sector and decided to go for it.

Brendan Gleeson, WCG's group sales & marketing director

WesBank is a division of FirstRand Bank and one of the largest finance companies in South Africa. It deals in a range of sectors but specialises in automotive finance throughout Africa. It sought a stock finance system for its large supporting dealer network and, after canvassing the marketplace, selected White Clarke Group’s (WCG) CALMS Wholesale product.

Steve Taplin, associate director at CHP Consulting

CHP Consulting launched its ALFA Wholesale Finance module in April 2008. The module adds a stocking finance function to the company’s flagship software system, ALFA Systems.

Dealer stocking securitisation was pioneered in North America during the 1990s but has rarely taken place in Europe. One exception was a sophisticated €850m securitisation of Renault and Nissan dealers’ floor-plans in 2005.

Yasmin Dossabhoy, principal at afl Solicitors examines the various forms of stock finance and highlights the rise of unit stocking

Stocking finance (SF) can take a range of different forms including unit stocking plans, revolving stocking loans, term loans, overdraft, advance commission and advance against advance facilities. However, since by its very nature, a flow of acquisitions and disposals of stock will occur, the corresponding finance tends to be predominantly of a revolving nature.

In the UK in recent years the term stock finance has become confused. To invoice discounters and factors (now invariably called asset-based lenders) it implies inventory-finance schemes where factoring companies advance funds against anticipated sales receivables. To automotive lenders, manufacturers’ captives and asset lenders, however, it means floor-plan or stock finance (SF) where funding is made available to vendors to stock assets with a reciprocal aim of retail return.

Although the roots of SF lie in the car, commercial vehicle and agricultural sectors, in recent times a greater variety of assets have been stocked in this way. For vendors and retailers, stock comprising machine tools, printing presses, IT equipment, caravans and motor homes invariably come with a funding facility via a captive or independent lender.

The benefits to asset manufacturers, and vendors of their assets, are clear. SF provides an additional line of credit to dealers and, at the end of the day it is all about enhancing cash flow. SF, of course, is not provided without a quid pro quo – the providers of such funding expect an agreed level of finance business to flow from the arrangement as assets are sold out of stock. This usually means the provision of leasing or other credit facilities to support the sale.