Fleet News

Poor payment and the risks of Insolvency, how fleet owners can manage risk

Eddie Flanagan, partner and head of asset finance at Corclaim

By Eddie Flanagan, partner and head of asset finance at Corclaim

At a time when the countries leaders and politicians descend into a state of ever increasing operational paralysis, many business owners are facing a landscape of unprecedented uncertainty.

All fleet owners credit check their customers, but it can be difficult to measure as to whether new leads are coming to you because of your ability to provide fleet, or have they come to you because of poor credit or relationships with their previous supplier?

In terms of Brexit, any business can deal with good news and surprisingly, most can deal with bad news. What all struggle with is continuing uncertainty. Should a business invest in new fleet or should it seek to extend existing stock?

We have seen many a good business see huge shifts in sentiment from the positive to negative and vice versa.

However , the commercial paralysis that is starting creep evermore into the daily business narrative, means that fleet owners need to prepare for some transactional turbulence.

By following the next few simple steps, you can decide when your customers exhibit signs of stress how best to deal with the situation.

Dust of those contracts and get them reviewed

No fleet user wants to face termination threats, the vehicles are normally the lifeblood of the business.

When can you threaten termination? Is your customer a limited company or are they protected by the FCA/CCA?

You will appreciate that regulated users albeit smaller in number have various strands of legislative protection.

Does the contract allow you to terminate swiftly if early default arises? Have you allowed part with possession arrangements? If so who is the end user?

Termination should be a last result as you will have the vehicles back and no income but that may be better than unfettered risk. What in life tools does the contract give to support your investigations?

In life inquisitorial tools

The better master hire, hire, HP and CSA agreements will have incorporated within them the right to seek management information, either annually or on the basis that any payment has been made late or the customer has shown signs of distress.

These tools are invaluable, you can look at fleet utilization rates, customer base erosion, supplier stress and funder support.

Often this can be a way to support the business through a rough patch or if the data provided is too adverse, bring around an orderly wind down, debt reduction and return of assets.

Extra security

Seek cross company or directors guarantees.

Termination, recovery and insolvency options

Do no close your eyes for fear of unutilised fleet. If you are not getting paid, get the vehicles back and if they are not offered up swiftly, seek either injunctive relief or recovery of goods.

Remember you still have rights if your vehicles are subjected to an administration order, it is really disappointing to see clients whose losses have mounted during administration. Seek advice when this occurs.

The next couple of years will have considerable risk, but for those who act now and review their contracts and their fleet relations, it will be they that prevail and prosper.

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