Case study: "I don't know how we managed without invoice discounting"

We have recently written a case study with the help of our customer at London Toughening, a specialist manufacturer of glass products in the South of England.

Financial Controller, Maria Demetriou was hesitant about using invoice discounting as she felt it would be expensive. After 18 months with Close Brothers, Maria has told us that she didn't know how the business managed before. The overdraft facility the business had with their bank was restrictive and was holding the company back from the substantial growth that invoice finance has now allowed. Maria has recognised that the beauty of invoice discounting is that it grows with your business rather than being a static amount that may or may not be sufficient.

Please click here to go to our website and read the full case study.

If you have any questions, or are interested to know how our invoice finance products could help you or your client's business, please get in touch by calling free on 0808 252 0353.

Biggest quarter ever for asset based finance as businesses borrow a record £18.9bn

Press release from the ABFA:

• Jumps 7% in three months and 10% in a year
• Largest companies account for almost a third of all advances

The three months to June 30th 2014 was the biggest ever quarter for asset based finance, with a record £18.9 billion of funding provided to businesses, says the Asset Based Finance Association (ABFA), the body representing the asset based finance industry.

According to figures from the ABFA, the combined amount of invoice finance and asset based lending provided to businesses leapt by seven per cent in the last quarter, from £17.7 billion in March 2014, and 10 per cent in the last year, from £17.3 billion in June 2013.

The ABFA says that demand has partly been fuelled by constraints on traditional lending, but that is has also gained traction as more businesses gain an understanding of how borrowing against the value of their invoices and other assets can free up cash to invest in growth.

The ABFA points out that it is not just SMEs – typically seen as the hardest hit by constraints on traditional lending - who are making use of this facility.

Almost a third (31 per cent) of the total advanced through asset based finance in the last three months was used by companies with an annual turnover of more than £100million.

The ABFA explains that 80 per cent of asset based finance is invoice finance, in which businesses secure funding against their unpaid invoices, while the other 20 per cent represents the fast-growing area of asset based lending, in which businesses can raise money secured against a range of other assets they own, including inventory, property and machinery.

Jeff Longhurst, Chief Executive of the ABFA says:

"Asset based finance is a proven tool for growth, enabling companies to increase their funding as they grow. Asset based finance is funding record levels of new jobs and business investment."

"What's becoming increasingly clear is that asset based finance such as invoice finance in particular, is the alternative to traditional lending for SMEs that the Bank of England and the Treasury have been looking for."

"We are seeing more and more businesses of all sizes and types taking advantage of invoice finance to fuel their growth, particularly as more traditional forms of lending remain subdued. More businesses are viewing their invoices as what they are – one of their biggest assets."

"Asset based lending is fast becoming a standard part of the finance suite for bigger businesses. As the economic recovery hits its stride, having funding that automatically expands with your business is a huge bonus. The ability to increase the size of your borrowing facilities as your business grows is one of the biggest strengths of asset based finance."

"That's a big plus for many businesses, because they don't have to keep re-evaluating their funding position and proving themselves to their lenders."

Amount of asset based finance advanced to businesses hits record high…

…While traditional lending to businesses falls by more than a fifth

The full statistical release, along with historical data are available at: https://www.abfa.org.uk/members/statistics.asp

Local councils lag behind Government guidance on supplier payment

Some councils are still making contractors wait 40+ days for payment

According to research by the Asset Based Finance Association (ABFA), local councils are lagging behind Central Government guidance on prompt payment of suppliers.

The results of the research reveal that local councils are currently paying their suppliers in an average of 17 days while in July 2010, Central Government departments were ordered to pay 80% of invoices within five days. In fact, some local councils are even failing to make payments to their suppliers within the 30-day payment period mandated by the Late Payment of Commercial Debt Act, which came into force in March 2013. The ABFA adds that the average wait for payment is still in excess of 40 days for some local authorities. Jeff Longhurst, Chief Executive of the ABFA, says: “Public sector organisations should be acting as role models for the private sector in paying their invoices as promptly as possible.” “Central Government bodies have performed well in hitting their prompt payment targets – many now pay more than 90% of their invoices within five days. The current average of 17 days for local councils leaves a lot of room for improvement.” “Those that fail to pay within 30 days risk damaging businesses in their local areas.”

SME subcontractors hit twice by waits for payment

SMEs are often hit twice by waits for payment when working on subcontracted projects for local authorities, as they have to wait for both the council and the main contractor to pass on payment. Research carried out by the ABFA found that SMEs are waiting 71 days on average to receive payment. Says Jeff Longhurst: “Smaller businesses brought in as subcontractors on projects for local councils are particularly vulnerable to delays in payment. As the third link in the payment chain, they often end up waiting months for their invoices to be settled.” “Local authorities need to make sure they are adding as little as possible to that wait by paying as promptly as possible and also in persuading their main contractors to pay their sub contractors quickly.”

Invoice finance can help to support cash flow for SMEs

As supported by the ABFA, invoice finance can be a vital component to assist cash flow for small businesses struggling to secure prompt payment as it gives businesses up-front advance on their unpaid invoices, regardless of the time customers take to pay. According to Jeff Longhurst, “with the economy having recovered back to pre-recession levels, there are now more opportunities for SMEs to grow, whether through purchasing machinery, expanding the workforce, taking on new customers or investing in R&D.” “A huge number of SMEs rely on outsourced work from local government bodies, but there is no reason why slow payment should become a roadblock to growth for them.” “Small businesses need to be aware of all the tools in their funding kit, including options like borrowing against their unpaid invoices, which are often their biggest asset.”


* Year end March 31

iGraphic

Every quarter we carry out a survey which canvasses the opinion of SME owners and senior management throughout the UK and Ireland on a range of issues affecting their business.


This month we have brought the results of our latest Business Barometer survey to life via our informative quick-view iGraphic called "How are SMEs feeling about the economy?" 
You can download the iGraphic by clicking on the image below:

5 top tips for SMEs dealing with growth demands

We at Close Brothers Invoice Finance help small and medium-size enterprises (SMEs) everyday to access vital working capital and support their growth.

SMEs are the driving force of the UK economy and make up a large proportion of our customer base. For that reason, we thought an article we found in Economia by Will Butler-Adams, Managing Director of Brompton Bicycle is a great read for small business owners looking for advice.

The article offers Will's 5 top tips for dealing with growth demands as a small British business.
See the full article here for tips on:

• Managing your growth step by step
• Not being afraid to ask for help
• Surrounding yourself with the right people
• Sticking to your roots

If you are a business owner with annual turnover of over £250,000 and are looking for support with cash flow and business growth, Close Brothers Invoice Finance can help.

Visit www.closeinvoice.co.uk for more information, or call one of our expert advisers free on 0808 252 0353 for a no obligations chat.

Lenders urged to find alternative for rejected SMEs

Finally some good news for SMEs who may have been rejected for business finance by their bank.

An article in The Times has announced that "The Chancellor is considering forcing banks to refer credit-starved small and medium-sized companies to alternative providers of finance.

"Banks are not obliged to refer an SME that they have turned down to an alternative funder. The Government is keen to make this process mandatory, potentially by introducing legislation, and intends to begin a consultation process. The announcement could be made in the Budget statement on Wednesday."

The full article can be found here (subscription required):

http://www.thetimes.co.uk/tto/business/industries/banking/article4035542.ece

Case study - Asset Based Lending

Ash & Lacy is a leading manufacturer and distributor of metal building envelope systems and ancillary products. The business, which has an annual turnover of £24 million, has three locations nationwide and is headquartered in West Bromwich.

Challenge 
Following their acquisition from The Hill & Smith Group, Ash & Lacy has gone through a period of investment in enhanced manufacturing processes, including bringing previously sub-contracted processes in-house. Subsequently, the business sought to expand rapidly into new product areas. Jonathan Evans, Chief Executive Officer at Ash & Lacy, called upon the services of Cattaneo LLP, an independent corporate finance advisory practice, for advice on suitable solutions to fund the continued development of the organisation.

Solution
Cattaneo LLP introduced the Ash & Lacy team to Keith Rose, Senior Sales Director at Close Brothers Invoice Finance. Further to a number of discussions to understand the requirement in more detail, Keith worked with colleagues across Close Brothers to put together a £7 million asset based lending (ABL) solution. This consisted of online invoice discounting using IDeal™, stock finance and also an asset finance package to repay existing acquisition debt whilst providing additional headroom for further investment.

Result
This bespoke funding package will provide the business with enhanced financial flexibility as it continues its capital investment programme that aims to improve efficiency, grow sales and create new jobs. Andrew Waterhouse, Finance Director for Ash & Lacy, along with his finance team, have been particularly impressed with the IDeal™ product because of its ease of use, flexibility and “real time” capabilities.

Jonathan Evans commented: “We are pleased to have selected a partner in Close Brothers. They have the appetite to invest in our sector and through listening to us and making an effort to understand our business plan, they were able to provide facilities that will allow us to make investment decisions that will have an immediate and positive impact on the growth of our business.”

Keith Rose, Senior Sales Director at Close Brothers Invoice Finance in Birmingham, said: “We are delighted to have this opportunity to work with Ash & Lacy, a brand name that is synonymous with the Midlands Region. We were extremely impressed with the company’s market position, manufacturing quality and importantly, with their highly experienced and motivated management team that knows exactly where they are taking the business.”

Martyn Pilley of Cattaneo LLP added: “The construction sector has been slow to emerge from recession and remains a challenging environment for many banks. However, Ash & Lacy has demonstrated the results that can be obtained from a carefully targeted investment which appealed strongly to Close Brothers Invoice Finance who have tailored a financial package that will meet the needs of this forward looking business.”

SMEs uneasy about rising energy prices

The Guardian have gathered some key pointers from a panel of experts around how SMEs can boost their efficiency. The article discusses subjects such as the pros and cons of remote working and outsourcing of "non-core admin elements".

The Guardian's report also gives tips around energy saving - a particularly timely subject following further price increases from the "Big 6" energy companies towards the end of last year. Results from the Close Brothers Business Barometer* reveal that SMEs are particularly uneasy about rising energy prices, with 88% of businesses in the print and packaging sector of the opinion that energy companies are taking advantage of them in terms of rising prices. 

Read the full article here.


*The Close Brothers Business Barometer is conducted on a quarterly basis. It canvasses the opinion of SME owners and senior management throughout the UK on a range of issues affecting their business.

SMEs are 'struggling over lack of access to money'

The Belfast Telegraph have run a story regarding how small and medium-sized businesses are still struggling because the Government is not providing them with enough information on how they can access much-needed funding.
As the UK continues to move into economic recovery SME's will play a vital part in the growth and regeneration of the economy.
Finding a provider like Close Brothers Invoice Finance can offer your company Invoice discounting and factoring solutions to help improve your business cash flow.
Full story can be found here.

How can invoice finance fuel growth in your business?

Whilst traditional forms of business finance like bank loans and overdrafts have become difficult to access over the last few years, more and more business leaders have discovered invoice finance as a fast, efficient way to fund growth.

Essentially, invoice finance allows your business to raise cash against the value of unpaid invoices. Typically invoice finance can provide you up to 90% of the value of each invoice as soon as you bill your customer.

A powerful injection of working capital

For any business, that can represent a really powerful injection of working capital. Take your own business. Think about the average value of your invoices, and how long your customers typically take to pay. Imagine getting that cash in your bank account as soon as the invoice is raised.

How much could you realise with invoice finance?

If an organisation invoiced £100,000 a month and its customers typically take 60 days to pay, invoice finance could provide £187,398 * cash almost immediately, funding growth in the business.

How much could you raise? Take a look at the Close Invoice Finance online calculator and you can use your own figures to get an idea of how much invoice finance could help you to raise.

A growing industry

In the last year alone, nearly 46,000 businesses in the UK and Ireland have used invoice finance facilities to fund their business, with the industry advancing in excess of £15 billion.

Find out more

To find out more about how invoice finance can help you to fund the growth you need in your business, download a handy invoice finance guide from the Close Brothers Invoice Finance website.

*Calculation is for illustrative purposes only.