Operator Licence – Financial standing

Commercial Motor
February 19, 2007

As a holder of a Goods Vehicle Licence does my business have to continually demonstrate that it has sufficient funds to comply with the “financial standing” requirement on the licence? Can details of the business’ finances be requested at any time and what happens if my business has insufficient funds? Is the licence at risk or are there ways of getting around it?Businesses need to plan well in advance if they are considering making an application for additional vehicles or say an additional licence in another traffic area. During 2006 more and more operators were unable to prove the financial requirements in the first instance and their applications were determined at public inquiries. Ultimately, failure to prove finance can result in failures of applications, a reduction in fleet size and in some cases revocation of the licence. All instances could be commercially devastating. The Traffic Commissioners have no discretion to allow a licence to continue if there are insufficient funds.

So what can be done if faced with this issue? First of all you will be asked to show the sum required has been continuously available for the last 3 months. The best and simplest evidence is a bank balance or overdraft facility covering the amount required. Speak with the bank manager and explain the position and see if an existing facility can be extended, even if only temporarily. Many operators rely on factoring agreements but this will all depend on monthly turnover. Others release equity in existing assets of the business i.e. plant and vehicles, others secure loans. Seek professional financial advice. Ask for more time to prove the figures as periods of grace may be offered. Most of all make sure the financial evidence is in order and well presented.Essentially, an operator needs to face this financial hurdle early on, well in advance of contemplating an application. Bear in mind that if financial scrutiny reveals that you cannot prove the sum required for your existing fleet, let alone the five extra you are applying for, you may risk losing some of the fleet you already have. Consider the facts before making an application and get your house in order first. Practical advice on managing your Operator Licence is provided by Elizabeth Caple, Transport Law Solicitor.

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Commercial Motor

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