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13 October 2009 Syscap secures additional £75 million in vital funding for professional services firms
Syscap, the UK’s leading independent finance company to the professions, has unlocked an additional £75 million in finance for the professional services sector from a UK bank, just as the rise in annual Professional Indemnity (PI) insurance renewal fees, that were renewed on October 1, has severely dented firms’ cash reserves. This additional £75 million in funding follows on from Syscap’s recent success in renewing and securing additional capacity with a number of institutional lenders to provide financing for professional services firms. Syscap says that although professional firms have suffered the knock-on effects of the recession the majority of firms are reasonably protected by counter-cyclical practice areas such as insolvency and litigation which tend to see accelerated growth during a downturn. However, Syscap points out that many firms’ cash reserves have been hit by the rise in PI insurance premiums which must be renewed every October. Research from the Law Society found that insurers have been quoting premiums up to 300% higher than last year, even where that firm has experienced no increase in professional negligence claims. Although the official PI renewal date has passed there is still a significant tail of law firms that have temporary cover from insurers but are still searching for funding for an entire year’s insurance so that they can escape the “assigned risk pool”. The assigned risk pool is where law firms that can not find PI cover in the market have to pay 27.5% of their turnover to the Law Society in order to insure themselves against law suits. Syscap says that this year they have received record requests for funding including requests for loans of up to £5 million. Philip White, Chief Executive of Syscap, comments: “Although the professional services sector has not entirely escaped the impact of the recession the vast majority of firms are still in a strong financial position. However, the considerable rise in PI premiums has acted as a drain on cash flow, and so any glitches over the next few months could plunge firms into real difficulty.” “Those law firms that have paid their PI premiums now have to worry about their practising certificates which are due by October 31, the cost of which has also increased massively, by 19% this year to reach £1,180 per lawyer. This outlay will be closely followed by their January 31 tax payment. Our advice to law firms this year is to get your funding in place early.” Latest banks to withdraw from the professions market include Fortis According to Syscap the collapse of Key Business Finance last year, the sector’s main lender, has been followed by the withdrawal from the market of a number of funders. It has been reported that both Lombard and Hitachi Capital’s Business Finance division have pulled out of broker sourced finance and Fortis has withdrawn entirely from the UK’s professional services market. Philip White says: “We are delighted to have unlocked an additional £75 million for the professional services sector, which will go some way towards ensuring that professional services firms have the funding they need to push ahead with vital business investment.” “The scarcity of capital available for the professional services sector has made securing funding for essential expenditure even more challenging for many firms. This new line of funding will go a long way towards reassuring those firms who are no longer able to rely on their banks or on the funders who have exited the market.” See coverage of this press release below: Leasing Life |
