Credit hire finance for accident replacement vehicle companies

A credit hire company pays for everything up front and is paid at the end. The vehicle is on the fleet with finance payments running, it is insured, delivered and collected, and the hire charge builds every day the customer keeps it. The customer pays nothing at the time: the charges are claimed from the at-fault insurer once the hire ends.

How long that takes depends on the route. Where the insurer and the hire company both subscribe to the industry's voluntary protocol for credit hire, rates and settlement timescales are largely agreed and claims settle faster. Where they do not, or where the insurer disputes the claim, it passes to solicitors and may be litigated, and settlement can take a year or more. A growing company is therefore always funding a book of open claims that is larger than its monthly income.

Insurers also compete for the same work. Under the Association of British Insurers' Third Party Assistance Code, an at-fault insurer can contact the not-at-fault driver directly and offer its own replacement vehicle and repair. Every driver captured this way is a hire you never start, so volumes depend on how quickly your introducers, such as bodyshops, recovery operators and brokers, get the driver to you.

A hire claim is not a trade invoice. The insurer has no contract with you, did not agree the charge, and can challenge it. That is why ordinary invoice finance providers rarely fund credit hire, and why specialist claims funders advance a lower proportion of the invoiced value than a factoring facility would.

Funders build their advance from your own data. They look at the amount actually recovered on settled claims as a share of the amount claimed, split by insurer, by settlement route and by vehicle class. Prestige and specialist hires recover less consistently than standard cars because insurers dispute the like-for-like need more often. The common grounds of dispute are well known: the daily rate charged against the basic hire rate the driver could have paid, the length of hire against repair or write-off timescales, whether a replacement was needed at all, and, where the driver claims they could not afford to pay up front, the evidence of that.

The quality of each file matters as much as the totals. A funder auditing a sample of claims expects a signed hire agreement, a liability position, an engineer's report, evidence of the repair or write-off date and a record of contact with the insurer.

• Recovery rates can fall without warning. A shift in how courts treat hire rates, or a large insurer taking a harder line, reduces what the book is worth and what a funder will advance against it.
• Growth deepens the hole. More hires mean more open claims, so rapid growth needs more funding even when every claim is sound.
• Fraud exposure. Staged accidents and exaggerated hire periods damage recoveries and a funder's trust. Robust checks at the start of each hire protect both.
• Regulatory boundaries. If your business also seeks out or refers personal injury claims, check whether that is regulated activity; the FCA's policy statement on how it regulates claims management sets out the scope.
• Personal guarantees. Directors are commonly asked to guarantee claims and working capital facilities. Our guide to personal guarantees explains what you are signing.