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Block Discounting
Block Discounting is a versatile financing option where Conister Bank acquires the rights to receivables from finance agreements with the Borrower (Block Customer), providing immediate access to capital.
Financial Flexibility: Mastering the Mechanics of Block Discounting
The cover ratio (minimum 125%) is calculated using the average Internal Rate of Return (IRR) of the gross receivables divided by the Purchase Price/Advance Rate. It’s a measure to ensure the loan is adequately covered by the underlying assigned receivables.
The advance rate, typically between 70-95%, is based on factors such as dilution (arrears, defaults, and write-offs) and concentration (maximum single exposures). It determines the percentage of funds the Borrower receives against the assigned receivables.
Conister Bank will also expect to take a floating charge over the Borrower’s assets. On each drawdown underlying assets will be secured and assigned to Conister Bank through a deed of assignment.
Capital and interest repayments are structured to match the average repayment profile of the agreements purchased (up to a maximum of 7 years).
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FAQs
What documents are required to have a Block Discounting 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.
What is the cover ratio in Block Discounting and how is it monitored?
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.
What are the repayment terms for a Block Discounting Facility?
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.
What security is required for the Block Discounting Facility?
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.