Block Discounting Facility

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Block Discounting

Unlocks Immediate Capital

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

What is the cover ratio in Block Discounting and how is it monitored?

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.

How does the advance rate work for a Block Discounting Facility?

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.

What security is required for the Block Discounting Facility?

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.

What are the repayment terms for a Block Discounting Facility?

Capital and interest repayments are structured to match the average repayment profile of the agreements purchased (up to a maximum of 7 years). 

FAQs

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 is Block Discounting?

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

How is the Borrower's financial performance monitored throughout the Block Discounting Facility?

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.

What happens if a Block Discounting Facility goes into default?

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.