At our recent series of lunches our finance expert Bob Blackshaw once again provided our professional colleagues with his current view of the market for business funding. Here is a snapshot of his presentation.
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Banks are increasingly looking to switch to invoice discounting, resist as far as possible as a regular overdraft is still the cheapest manner of funding working capital.
Rates are becoming more competitive but assessment of credit is taking much longer. Take care with regard to 3/5 year break clauses within facility letters as these allow the lender to revalue and restructure pricing, Lloyds currently will look to 20 year term with no break clause.
Invoice Discounting & Asset Finance
This is more competitive than ever with a greater number of providers. Always obtain at least three quotations and where there is an existing arrangement in place, review annually as providers are desperate to retain business and will, if under threat, become even more competitive.
Very difficult where the High Street banks are concerned, they require a track record going back several years and are still not forthcoming unless the request is almost ‘gold plated’.
My contact with the Bank of England advises me that a new scheme will be launched next month for small developers where a minimum of five dwellings are to be constructed. It has very competitive fees and rates. This can take time to process but could be worth it as the lending is cash flow driven and the BOE will allow proceeds to be recycled to assist cash flow going forward.
Peer To Peer
Expensive but when this is the last resort it should be considered, there are signs that Funding Circle (the main player) is now looking at secured loans as opposed to unsecured.
Well worth considering where high up front development costs are envisaged, usually the investor will look at a five year pay back from a sale/ refinance. Not for the faint hearted.
Free money!! Provision is related to job creation within manufacturing and engineering at the top of the agenda. Generally grants provide up to 30% of project cost with a formula of £10,000 per job. Currently the scheme operating via Wolverhampton University has funds still to allocate.