In the past nine months, guests attending FLA functions such as the Summer Drinks reception, have become aware of a gentleman by the name of The Rev. Dr. K. Bill Dost, circulating among the folks. He is the Managing Director of D&D Leasing UK Ltd (“D&D”), a new specialist small ticket asset provider to the UK leasing Market. Established on the principles of its Canadian parent company. D&D has found a niche as an alternative funder to those small medium sized enterprises that struggle to raise much needed investment capital for asset acquisition in their businesses.
At a time when many traditional funders in this field have wholly, or partly, exited the market, either by culling their broker community, and possibly excluding whole industry sectors, while simultaneously hardening their credit appetites for the remainder, D&D has come to the market specifically in these under-served funding arena.
An independent, privately funded company, its small management team has over 65 years leasing industry experience, together with robust underwriting and credit processes, procedures, and systems. These factors are allowing D&D Leasing to forge ahead, writing business in these turbulent sectors, while delivering higher levels of security and commanding realistic, sustainable, and healthy returns on their investment.
Benefitting from private funding, D&D avoids funding vehicles such as block discounting line, and retains the equity in its own business. This brings confidence to its broker community as to continuity of funding for their customers’ deals. As a further comfort to brokers, D&D says it will remain committed to this private funding ethos, and will look to develop additional lines as the business expands in due course.
So what is it about D&D’s business model that makes it different? While essentially and asset-based funder, rather than basing decisions on balance sheet lending, or residual values. D&D predominantly concentrates on the Story behind the credit. The Story refers to the practicalities of the lessee’s business, the application of the asset, the experience of the management team, businesses ability to make repayments, and crucially, the ability and commitment of the principals to support the deal through guarantees.
Frankly I was shocked to see how aggressive the market was in the UK
The Rev. Dost says, “Our USP is the fact is that while we are not on the commodity pricing side of the market we fill a very necessary niche. Our specialisation finds us going to market and supporting those businesses that typically don’t receive A or B funding even in good economic times. This means we help to drive the economy forward by supporting the businesses that we do while at the same time ensuring our broker partners and ourselves make a good living.”
D&D’s route to market is via a core of approved and accredited brokers with whom it plans to establish long term profitable relations, based on good credit policies, and quality of service, with an average ticket size of £15,000, on a maximum term of 3 years.
Entering the UK market in January 2009 as a new company, D&D commenced writing business in April 2009 via the broker community. Initial plans for growth while assessing performance, capability, and product specialisation. D&D is clearly seeking to build existing volumes to a running new business level of £6 million by April 2010, with the emphasis on maintaining a performing portfolio.
The Rev. Dost recalls his first reactions to the UK market, “Quite frankly, I was shocked to see how aggressive the market was, with the customers that the broker community brought us ready willing and able to purchase our product. In North America we find the reverse currently with customers in a holding pattern and watching the economy prior to making any decision.”
Recognising the difficulties in this economic climate, in general, and its chosen sectors specifically, D&D is making realistic provisions for bad debt. However, greater reliance is placed on the in-depth credit procedures, structuring of deals, and security taken, together with the adoption of a number of unique “to market” initiatives to protect their interests, which will markedly reduce their exposure to bad debt. Thereafter the business plan escalates via utilisation of additional increased funding, and the established rental revenues becoming available for re-investment.
The Rev. Dost adds, “What most people ask me when they learn about D&D Leasing is . . . Why? Why did we come to the UK, why did we want to sit in the alternative funding market, and why do we feel we will succeed?” The answer is simple, we came here because we saw an opportunity, not just to grow ourselves, but to support businesses that often get overlooked, and all the while doing it in an ethical fashion. Our key to success is our staff, they have the privilege of going to work every day in a career they love, helping people to grow and succeed in their own businesses. We sell people the ability to achieve their dreams every day.”
Conservatively, the business plan provides for an estimated run rate of £10 million by April 2011, and £15 million by April 2012. The business model is about quality of service, and performance and growth, achieved through profitable returns rather than by volume or acquisition.
D&D’s mid-to-long term plans include, flotation of the company on the AIM market to fuel expansion into Central & Eastern Europe, and India, with control of the Company remaining firmly within the present shareholder and management teams’ hands.