Block Discounting Facility FAQs

Block Discounting is a financial solution in which a finance company, like Conister Bank, buys the rights to the receivables from finance agreements held by the Borrower. This arrangement allows the borrower to access capital immediately while retaining the management of customer relationships and contracts. This type of financing is beneficial for businesses that require liquidity but wish to continue managing their customer interactions and servicing the original agreements

The cover ratio, which ranges from 105% to 215%, is calculated by dividing the average Internal Rate of Return (IRR) of the gross receivables by the Purchase Price/Advance Rate. This ratio serves as a measure to ensure that the Facility is adequately secured by the Borrower's assets.

The advance rate, generally ranging from 70% to 95%, depends on factors such as dilution (arrears, defaults, and write-offs) and concentration (maximum single exposures). This rate determines the percentage of funds that the borrower receives in relation to the assigned receivables.

Conister Bank mandates a floating charge on the Borrower’s assets. For each drawdown, the underlying assets are secured and transferred to Conister Bank through a deed of assignment, safeguarding the interests of both parties.

Borrowers are required to make payments towards both principal and interest over a period that matches the average duration of the agreements purchased, with a maximum term of seven years. This structure ensures a steady reduction of the Facility balance over time.

If default happens, the Borrower has the option to substitute the defaulted agreement with additional receivables (unencumbered assets), which are then transferred to Conister Bank. This arrangement allows for the maintenance of agreed-upon covenants and the security of the Facility.

Borrowers must submit Anti-Money Laundering (AML) and Customer Due Diligence (CDD) identification, proof of address, and additional relevant documentation to fulfill legal obligations. This adherence to regulatory and legal standards guarantees compliance.

A pre-lend audit is conducted initially, followed by quarterly audits, which may include both remote and on-site visits. These audits review financial performance, regulatory compliance, customer journey, and agreement details.

Conister Bank reviews monthly management information and loan book data to monitor financial and non-financial performance covenants. Borrowers can provide open banking permissions as an alternative to monthly bank statements.

Costs include pre-lend audit fees, legal fees, and an arrangement fee of 1% of the facility upon signing the agreement. Costs vary based on the product lifecycle and company’s performance and are negotiated during the onboarding process.