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Highlights

Impact Holdings gained admission to AIM via a reverse takeover by cash shell Nanotech Energy. Impact Holdings is a pre-settlement lender i.e. it provides individuals, solicitors, insurance and claims management companies with funding relating to court cases and pre-agreed claims. The loans are repaid when the cases are settled or invoices are paid by insurers. Impact has also identified a number of funding opportunities in a wide range of commercial opportunities.

• Impact generates profit by charging interest and fees on its loans. It only lends against a guaranteed outcome and consequently debt serviceability is not an issue. Timing of repayment is usually the only uncertainty with most loans repaid within 2 years. Demand for this type of financing has grown since most forms of legal aid for personal injury claims were abolished on the introduction of the Access to Justice Act in 2000.
• Impact was set up in July 2004. It is regulated by the OFT through which it is licensed to lend under the Consumer Credit Act 1974. In August a further £3.5m gross (£3.2m net), was raised to grow the loan book.
• Loans are targeted primarily at individuals, organisations and firms of solicitors involved in personal injury or insurance claims. In the majority of cases, the claimants would have characteristics such that mainstream lenders would be unwilling to advance a loan. Consequently, interest rates with an APR of c.12%-19% are charged plus administrative fees, whilst the cost of group borrowing is c.8.25%.
• The money usually goes to an intermediary rather than the beneficiary and will be secured against the case/invoice. Default risk is minimised by taking security, insurance and indemnities from the solicitors' practices and the claims management intermediaries. Reliance is also placed on the personal liability of solicitors for the debts of their practices. The group applies a bad debt provision rate of 1% of new loans. This is conservative based upon the trading experience of ICL, which was the holding company of Impact before the reverse.
• The Company has relatively fixed overheads. Consequently, when it hits a critical mass of lending to cover, a high proportion of the net margin on every new loan will fall through to the bottom line.

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