New lending law good news for Scottish business – banking expert

Lawyer Gavin Buchan, who heads the banking team at legal firm Lindsays

A NEW LAW aimed at making it easier for Scottish businesses to borrow against its moveable assets can potentially open new avenues to obtaining much needed working capital, a banking expert believes.

Gavin Buchan, a Partner who heads the banking law team at Scottish legal firm Lindsays, has welcomed the Scottish Government’s Moveable Transactions Bill, which has recently been granted Royal Assent (June 13).

As well as allowing businesses to borrow more easily against physical – moveable – assets, such as machinery and stock, the bill also enables firms to raise finance against intellectual property including trademarks and patents. It also brings about reforms to some commercial transactions, making them more efficient and less expensive.

Mr Buchan said: “This is good news for Scottish businesses and the Scottish economy. It makes the process of being able to borrow against assets and income streams far simpler.

“One of the important features is that companies will find it simpler to borrow against the value of invoices which they have out to be paid.

“Businesses will be able to transfer the benefit of those payments to lenders for money up front so there is access to working capital on the basis of the monies owed to them.

“They’ll also be able to provide physical assets and stock as security to raise finance whilst still having access to actually use those assets – that’s a significant benefit as the current law requires those assets to be passed to the security holder. 

“Under the current system, I know some companies had been incorporating themselves in England, where it’s easier to obtain finance against moveable assets, to try and facilitate that. This was a workaround, which was not ideal for Scotland. Hopefully that leakage will stop as a result of the bill.”

The bill is applicable to all businesses, no matter their size, sector or profile.

It will include a registration process for some of the documents needed by lenders to take advantage of the changes to better grant security.

Mr Buchan, who advises a wide variety of banks, lenders and borrowers, says work will be needed to highlight the opportunities for businesses, supported by careful legal and financial advice.

He added: “The current system has far too many hurdles to overcome, ranging from difficult to impossible. This new bill simplifies that.

“This Bill, when it comes into force, will be good news for Scottish business. It makes things akin to arrangements in England and levels the playing field.

“There will be companies with assets which they have not previously considered as being accessible. As this Bill progresses, mainstream banks and lenders in Scotland will be pushing this as an angle to secure further funds for their business customers. If a company has a product or property they have provided as security, they have a different avenue of finance to support their business.”

The Bill implements recommendations made by the Scottish Law Commission’s Report on Moveable Transactions.

Speaking as the Bill reached its final stage at Holyrood, Public Finance Minister Tom Arthur spoke of his hope that lenders could charge lower interest rates, given they will be lending against secured assets.

He said: “Better access to finance will support innovation, and by improving the current inefficient and expensive methods of raising finance, the Scottish Government is helping drive forward Scotland’s economic recovery in line with our National Strategy for Economic Transformation.”

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