Ever wondered who pays for all those personal computers that sit in showrooms tying up capital, or where the money comes from to finance the millions of cars on dealer forecourts, or the myriad refrigerators in electrical discount stores? It’s not something that would concern most people, unless that is, they had to find the working capital for 30,000 square feet of demonstration equipment in the latest electrical mega-store franchise. CFS Group Plc (Computerised Financial Solutions), a UK software house based in Basingstoke, Hampshire, is quietly going about the business of writing software to link the three corners of a very important triangle. Asset providers (such as IBM or Ford Motor Co), finance providers such as banks and the dealerships which need IBM’s or Ford’s latest stock. The business is collectively known as asset backed, or floor planning, finance due to the loan security provided by the physical stock. It allows dealerships to obtain stock quickly, while only paying competitive interest rates on the invisible funds used to obtain it. CFS has been in this market since the 1970’s, and as the UK financial markets starts to wake up to opportunities it offers, CFS is starting to bring in the business. Net profits for the interim period to June 30 show profits up 131% and revenue that rose 111% to 3.7m pounds. Chairman Alfred Stein explains: This type of financing grew out of the post-war automotive industry, but most finance companies in the UK still don’t understand it, finance has been more traditional here.
Funding from IBM
CFS also started out in the automotive sector, running its software on NCR Corp mainframes, purely on a facility managed basis. Lloyds Bowmaker, the motor finance giant, was the first customer. When NCR discontinued its hardware, the software was ported to the AS/400 and renamed Credit Line Plus, the new version allowing for sales of the product on a licensed basis. Customers currently on board include Ford, BMW, Electrolux and Lloyds Bowmaker, which followed CFS to the new AS/400 format having previously tried to go its own way with an in-house solution. But perhaps most significantly of all, IBM is now funding CFS to develop Credit Line Plus specifically for its own needs within IBM Credit Corp, its internal financing arm. IBM has agreed to license the program for use within 14 countries across Europe and Africa, all to be managed running Credit Line Plus from a single processing center. Along with the license sale comes a three year maintenance agreement together with the funds to customize and develop the application. The beauty of the system, says Stein, is that once the basic core is in place, the software can be converted to any language and any currency with relative ease, because the basic functions of finance don’t change. And the same argument applies to the industries to which the software can be applied. CFS grew from the automotive industry, but the addition of Electrolux and IBM shows the size of the market CFS could one day be looking to address.
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