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Navigating the Business Finance Maze

Richard Leeder recently helped a new client to navigate the Business Finance Maze after they ran out of essential capital at the worst possible moment.

A well-established contract building company who make money year in year out, but face all the usual pressures on cashflow, approached us when they needed funding quickly to satisfy a commercial mortgage lender.

Having gone over the original 12 month term of their agreed facility the funder had come to view the progress of the works. The original Victorian building had been gutted inside to make way for six 2 bedroom flats and four 1 bedroom flats; this seemed to worry the lender (they deemed the property to be in a worse state than 12 months ago, but our client argued it needed to be gutted to allow the rebuild!) and they only agreed to allow the extension of the credit facility if the builders could demonstrate that they had £220,000 available to complete the works.

The director of the company with the remit for raising finance was polite but reserved, happy to discuss the potential funding that we had available but seemingly a little disillusioned: ‘Of course this is all academic; in 14 years banking with our high street bank they have never extended us any credit. Last month we needed skips on site and were told we would have to pay up front, our credit status didn’t warrant terms.’

Challenge Accepted!

With three directors in the business we identified our first possible route to finance – to raise each of them a personal loan that could be introduced into the business, and repaid from the business bank account. Within 48 hours we had £110,000 approved and paid out. In some respects, this gave them an added benefit as they have each increased their ‘skin in the game’ with individual investments back into the company (fully unsecured) plus these personal loans will be converted into directors loans. Finally, we approached a Peer to Peer funder who arranged £50,000 working capital.

When added to their available capital, they now had the necessary £220,000 and were able to get an extension to the commercial secured finance and move on to completing the build.

Another working capital issue the business faced was a Corporation Tax bill of £30,000; imagine the directors’ surprise when informed that SMEs can now finance this short term cost with an unsecured business loan! This was placed with one of our top-tier panel lenders, with repayments agreed over 10 months.

That is £190,000 delivered in under a week for a business that failed to get funding from their bank for skips!

Fortunately, not all funders are looking for AAA and Tier 1. With more and more funders joining our panel and our experience in raising the capital required, at the best rates and quickly, it is very rare that we fail. The Bank may be unwilling to support you, but that doesn’t mean there isn’t funding available.

 

Why not get more Finance Insights direct from PFC Finance by clicking here.

THE ROUTE TO FINANCE

For start-up businesses and SME’s, it can be tricky to convince lenders to grant you funding especially if your business hasn’t taken off the ground just yet or if you’re fairly new to the business and are already looking to expand. Often, if the principal bank does agree to finance the business, they will look to bolt-on far reaching security comprising debentures and will sometimes only agree to the finance if they can dilute their own funding with any of the available grants that exist for small to medium sized companies. This is very time consuming and laborious and certainly doesn’t help the client if they need fast access to decisions and finance.

We’re here to provide you with access to finance where others may say no. Together we can decipher what your best financing option would be, so that we can then put it forward to our panel of more than 45 lenders to find the best solution for the individual or business.

With our many available routes to finance you may never need to go to your bank again to ask for specific funding. PFC very rarely fails in successfully sourcing finance for our clients.

We listen to every business and we look at the size of your company, the owners and how much you have estimated that you want/need to borrow, so that we can work out ideal repayment terms and identify types of credit available.

In 2017 we have arranged an eclectic mix of funding already, for small sole traders up to multi-million turnover incorporated businesses.

Five and six figure VAT and tax loans (incredibly useful for ring-fencing essential cash within the business), single invoice finance (a few of our clients have provided current outstanding invoices which we have been able to get funding against to inject working capital into the company but without the need for entering into long term invoice financing), personal loans (many small business owners find this an ideal and competitively priced method of introducing capital into the business), asset finance (commercial vehicles, scaffolding and IT are some of the equipment we have arranged asset finance for so far this year), invoice finance and inventory funding (large major restructuring for a plant hire company, we were able to instruct a top-tier panel funder to roll out a new invoice finance package supported by a funding line for their stock) and many working capital loans.

In most instances, with a couple of items of supporting information (management accounts, last full filed accounts, and perhaps a few months business bank statements) we can propose to our chosen lender and obtain the approval within a few hours – this means from proposal to funds being paid out can be completed in as little 48 hours, and occasionally in the same day, depending on the type of finance applied for.

If this all sounds too daunting, don’t worry. You can always call us to walk you through the process and assist wherever possible along the way. If you’re thinking of borrowing to improve your business be it a small refit or a full-scale expansion, don’t hesitate to give us a call on 01829 738 799 or send us an email: enquiries@pfcfinance.co.uk.

How to Get Ahead With Your Debtors…

Every small business in the country will have experienced late payments at one time or another.  Fortunately, the issue is often short lived with customers paying up after a gentle prompt, however sometimes customers operate to different payment terms or may delay payment due to their own business issues which can have a negative impact on the cash-flow of the supplying business.

Any delays to payment can be hugely frustrating and have a negative impact on a business.  In the past, businesses may have approached their bank to extend their credit facilities or for a loan, however today more companies are turning to alterative lenders who are able to offer a broader range of funding options, with flexible and bespoke solutions to their individual needs exemplified by the Invoice Discount or Factoring facility.

Statistics from the Asset Based Finance Association suggest that alternative lenders are providing more funding to SMEs than ever before. In the first quarter of this year alone, SMEs raised £711m from the sector according to the ABFA, a 60% increase on the same period of 2015. The sector’s total lending to SMEs now stands at £19.3bn.

The increasing use of other types of business finance reflects a heightened awareness amongst SMEs that they do have funding options other than what’s available from the banks, with research suggesting that more than 75% of SME CEOs are now aware of options beyond traditional banking.

Industry data suggests that this is feeding through into take-up, for example, 12% of SMEs are already using invoice finance, while a further 46% say they would consider doing so if and when they need to raise finance.

The reasons that invoice financing are proving to be so popular is the speed in which they can achieve access to funds as well as the cheaper cost of funding and its simplicity. Additionally, the stress and time consuming nature of chasing payments from your debtors is taken over by the Invoice Finance provider, either on your behalf, or confidentially.

In fact, in most cases, PFC’s client that have taken up Invoice Finance facilities, often see a significant increase in turnover and profitability as they are given the chance to concentrate on growing the business and not chasing payments or dealing with extended payment days.

For these and other reasons, the Federation of Small Business and the British Chambers of Commerce have been keen to promote the option as one of the diverse range of financing options.

With uncertain times ahead and much change forecast for the economy, having access to alternative forms of finance can be the lifeline for many small businesses.  With access to finance and the rise of alternative finance options, let’s hope the frustrations of a small business owner are short-lived.

If you’re looking for access to finance, contact the team and let us discuss the options available to you.

WHAT’S THE SCORE WITH CREDIT RATINGS?

Business owners who believe they have a ‘bad’ or ‘low’ credit rating can be understandably reticent in applying for essential funding. Perhaps they base this on the knowledge their personal credit report is weak, or they suspect their trading performance isn’t perfect.

 

However, although it is fair to say that UK businesses and consumers have experienced a tightening in lending from the high street banks, here at PFC we take a slightly different approach and principally look at the fundamental parts of the finance proposal: purpose, amount, length of time trading, number of owners and the term required.

 

It’s the combination of these factors that create a proposal and when they make ‘sense’ (the purpose is valid and will aid the business, the amount requested is reasonable considering the monthly revenue income for the company, historic trading patterns, number of equity owners to reduce the lend/risk ratio, and finally a repayment term that is sensible and matches the purpose) they can outweigh the credit scoring condition.

 

Unlike many lenders who use faceless algorithms to make lending decisions, at PFC we work with a panel of more than 30 lenders and examine what are a company’s or individual’s needs and what information do we need to help us make an informed decision.

 

We also speak directly with our clients to get an understanding of their personal situation and explore many different routes to finance that will match their needs and circumstances.  For example, a client may come in asking for a loan as they are needing money to expand their business or to help with cash flow at certain times of the financial year.

 

By having an understanding of a client’s business or their circumstances helps us find alternative routes to finance for them. As such, we may be able to secure finance against an unpaid purchase order or even existing assets within a business that could help release capital for growth rather than just take a traditional ‘business loan’ route.

 

Working with the information we have from the business or individual we are then able to approach our panel of lenders and find the right package for them, pulling in specialist finance houses when required.

 

So, if you are looking to access finance but are worried your credit score isn’t good enough, why not try PFC and see what we can do for you?

How Invoice Financing Can Improve Cash Flow

It’s one of the main issues that B2B suppliers face, particularly SMEs and sole traders. When a product or service is supplied to another business and an invoice raised, there is generally a delay before payment is made. It can take on average 30 days before funds return to your business and can be reinvested, used to cover running costs or get more product out into the marketplace. In many instances, especially when in partnership with large corporations such as supermarkets, this invoice payment delay can be anything up to two to three months.

That’s a long period when valuable cash flow is stalled.

Obviously, this situation causes problems for small and medium sized businesses working on tight or limited budgets. Invoice financing is designed to help companies get over this problem. When an invoice is raised, financing can be taken out to provide immediate payment, rather than having to wait until the invoiced company pays up. Once that invoice is fully recovered, the loan is simply paid back.

Cash flow is important to all businesses but more so to SMEs and sole traders who generally have to compete within tight margins. Getting the right invoice financing in place to ensure that money is available when a business most needs it is part of accepted operating strategies nowadays. That means a business isn’t left on hold while they are waiting for payment to be received. They can implement growth strategies and deliver more products and continue to thrive rather than treading water and twiddling their fingers while the client account department hangs onto that invoice.

For business to business companies that rely on a flexible cash flow to compete in their markets, invoice financing is the perfect solution for the immediate release of finances. It allows them to introduce working capital, pay wages and focus more on the future.

At PFC, we have access to a range of funders and can provide invoice financing to businesses across a wide spectrum, from those that have been operating for a while to start ups that have less of a credit history. It’s not just about providing loans to cover these payments, allowing companies to continue to operating effectively. It’s also about building strong relationships that are designed to deliver the financing options many SMEs and owner managed sole traders are looking for to make their businesses more competitive.

The Unavoidable Truth

They say that there are only two things you can be sure of in life and they are death and taxes. The good news however is that there are measures that you can do in both cases that prolong life or reduce the impact of taxes on your business or personal cash flow.

Many will have the first in hand with ‘Dry January’ or various New Year resolutions to get fit, eat more healthily or give up smoking in an effort to live a healthier and hopefully longer life. When it comes to managing taxes, unfortunately you can’t put off the inevitable deadline of 31st January for self assessment tax returns, however there are plenty of options to consider if looking to secure funding and help manage the tax bill payment.

With a range of lenders making up PFC’s funding panel, no tax bill is too great or too small. In addition, there is a specialist team on hand to provide a quick decision making process and advise on the required levels of funding, your preferred terms and how repayments can be structured to allow you to budget for manageable repayments.

Arrangements can be made for payment to be made directly to HMRC or into an office account, typically within a week of the application. The repayments are in turn arranged in line with the liability so typically between 6 and 12 month terms for self-assessment tax funding.

Having the flexibility of a short term loan for tax liabilities allows you to spread the cost of the liability into manageable monthly payments to assist with the budgeting in the company, help ease cash flow and relieve the pressure of having to find a lump sum payment.

The short term, unsecured fixed rate loan facilities offered by PFC cover all types of tax funding including; Schedule D tax, corporation tax or capital gains tax to name a few. With the right tax funding support in place it can give individuals and businesses a new lease of life by removing the worry and freeing cash for other business priorities.

It’s also good to know that with your tax taken care of there’s a weight off your shoulders and a great stress relief. Maybe with this support you can take care of two of life’s certainties by better managing your tax and in turn potentially living a longer stress free life.

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