Financial challenges for manufacturers
Managing cash flow and dealing with late payment
Manufacturers are often required to allow customers time to settle their debts after the goods have been supplied, perhaps up to 30, 60 or even, in some cases, 120 days. When this is coupled with having already had to pay for raw materials, running costs and salaries, cash flow problems can arise.
Touch offers a number of solutions which may be able to help with these issues – from invoice finance to revolving credit facilities and business overdrafts.
Keeping up with technology and dealing with international competition
We all know that technology can make a manufacturing businesses more efficient and productive, giving a better chance of seeing off competition from overseas. But investing in new machinery, equipment and software can be costly – most smaller manufacturing firms don’t have the cash saved in the bank to make those investments easily.
Touch can put you in touch with asset finance providers, or lenders who can extend loans secured against equipment or property, or even unsecured loans.
And don’t forget about your Annual Investment Allowance – a recent survey from BDO shows many manufacturing firms fail to write off the cost of new machinery items against profits. It’s particularly important now that the AIA limit has been raised to £1m (until January 2021).
Another way some manufacturers deal with international competition is to work with them – buying in part-made products and completing them locally. This raises its own financial challenges, some of which can be met with trade finance.
Filling the skills gap
Finding qualified and capable employees can be difficult. While the huge engineering and manufacturing companies may have strong connections with colleges providing them with a ready supply of labour, that’s harder to do if you’re a smaller business. Sometimes the answer lies in training existing staff or creating an apprenticeship scheme, but increasingly manufacturing firms are looking at automation and robotics – great for long-term efficiencies but expensive to set up.
Financial products for manufacturing firms
There is a range of financial products that are suitable for manufacturers, and we’d be happy to talk them through with you.
Asset based lending
This is simply a way of using your existing assets as leverage to bring cash into the business. Commonly used assets include:
- Your receivables or invoices
We work with dozens of hand-picked invoice finance and factoring providers and can put you in touch with the most appropriate ones for your business. Many – but not all – factoring providers are manufacturing or engineering specialists. We’ll help find the right one for you.
- Plant and machinery
We have relationships with a number of finance providers who can unlock the value of your physical assets – for manufacturers this can typically amount to 25% of annual turnover.
Lenders can secure finance based on your business or personal property.
This is often more likely to be used by suppliers to the manufacturing industry or distributors, but some manufacturers do carry significant levels of stock. Indeed we are seeing inventory levels increasing as order books are declining for manufacturers across the country.
Business loans are typically unsecured or secured – unsecured business loans usually require a personal guarantee, whereas secured loans are secured against property (or other high value assets).
Revolving credit facilities and overdraft replacements
Useful cash flow management tools, overdraft replacements (often called revolving credit facilities or business advances) work just like a bank overdraft. Money is drawn down from a pre-agreed credit limit and interest is charged daily until it is paid back. Credit limits are usually based on business turnover.
Get in touch
Knowing which lenders are best suited to the construction industry could require a lot of research, but Touch is an expert at finding which ones can offer suitable financial solutions for construction companies. After a brief chat to understand your needs, our expert consultants will put you in touch with up to three funders to help you on your way to getting the finance you deserve. Give us a call today on 0207 001 9142 or complete our form to get started.