Business in the renewables sector realises growth ambitions through flexible funding
Challenging economic conditions over recent years have put company payment trends firmly under the spotlight for business leaders, be they in relation to late supplier imbursement, employee remuneration or ways of retaining capital for reinvestment.
As the regional and wider UK economies have continued their gradual recovery, businesses’ keenness to maintain positive cashflow to ensure their stability, alongside suppliers’ eagerness to be paid quickly to preserve their own liquidity, has led some companies to become more cautious in the terms they extend to partners.
However, against the same backdrop, a number of West Midlands-based companies of all sizes have maintained their propensity for growth. By overcoming their working capital hurdles through the use of alternative forms of funding, such as factoring and invoice discounting – which advance the value of issued invoices to provide additional liquidity – firms are positioning themselves to take advantage of expansion opportunities emerging from the recovering economy. In doing so, they are turning their strong sales ledgers to their advantage and contributing positively to the improving trading climate in the region.
Adapting to businesses’ growth requirements
Invoice finance, which includes factoring and invoice discounting, is now considered a mainstream form of enterprise funding thanks to its highly adaptable and sustainable qualities in both shoring up cashflow and fuelling growth.
The flexible nature of these forms of finance means that they can be adjusted to match a business’ performance, with the amount borrowed growing directly in line with sales. The more trading success a firm enjoys, the more funding can be released against the value of its issued invoices, which can subsequently be re-invested for growth.
For smaller firms, factoring offers an alternative which mandates the provider to perform a credit management function to chase unpaid bills, freeing up administrative time which can be spent improving operations, customer service or actively exploring expansion opportunities.
For those more established companies, which operate in-house credit control functions, invoice discounting allows them to release finance from issued invoices whilst still interacting directly with their debtors to secure payment.
Invoice finance is suitable for a variety of scenarios which require strong cashflow such as M&A activity, refinancing, turnarounds and – most prevalently – expansion capital, and it is this flexibility and adaptability which has seen it become a key player in the business funding landscape.
A collaborative approach to invoice finance
The nature of invoice finance means that providers gain a deep understanding of a business’ strategy and are able to quickly react to funding requirements on a short, medium and long-term basis. It is this partnership-led approach, such as that employed by Lloyds TSB Commercial Finance, which is bringing many brokers and advisors in the West Midlands to recommend their clients to consider invoice finance as their principal form of funding.
This emphasis on quality of service and delivery is more important than ever to both the businesses we fund and our introducers in the post recessionary environment.
Underlining our commitment to supporting companies and providing service excellence, our pioneering Introducer Charter for lawyers, accountants and brokers ensures that our contacts in the professional community can offer the best possible service to their customers. It also pledges to provide a refund towards cashflow forecast costs, and keep our business introducers fully updated on the status of negotiations at all times.
Similarly, our Client Charter allows prospective clients with a turnover of up to £15 million to obtain an indicative lending decision within 48 hours and pledges to match any competitive offer that corresponds with its credit profile.
A tidy case in point
One Birmingham-based firm which is utilising an invoice discounting facility to boost turnover and invest in its future is PPF Environmental Services (“PPF”), which cleans, processes and granulates materials which are not normally recycled, such as used plastic, car upholstery and baby wipes.
Established as a consultancy business in 2009, managing director Paul Woodhead soon identified an opportunity in the growing renewables processing industry, which it entered in October 2010.
In order to support the business’ rapid expansion in the sector – which offers opportunities for notable growth as a result of heightened social environmental awareness, and tightening public and corporate legislation – management approached Lloyds TSB Commercial Finance for a cashflow solution.
We supplied a £200,000 invoice discounting facility in May 2011, providing the company the financial headroom to invest in growth and setting it on track to take turnover from £100,000 to £1.2 million this year. PPF plans to supply directly to its end customers, plastic injection firms, and has already taken on five new members of staff to capitalise on the increased demand for its service.
On securing funding, Paul Woodhead, managing director of PPF, said: “A lot of the materials we deal with would have been resigned to a tip a couple of years ago. But, as a result of the growing public’s awareness, improvements in technology and sustainability moving up the agenda, we are seeing an increase in demand for our services.
“The invoice discounting facility has been ideal as it advances our issued bills, giving us the liquidity to concentrate on expansion and as a result, we are on track to boost turnover by more than tenfold this year.”
Fuelling growth in the West Midlands
The gradual, long-term fiscal recovery will present opportunities for SMEs and major corporates alike to consolidate their positions and gain significant competitive advantage over rivals. Those companies with robust market propositions and strong management teams, such as PPF, can use our invoice finance solutions to pull away from the competition.
For businesses that have been shoring up their market position in anticipation of the economic recovery, the latter half of 2011 and beyond represents an ideal time for expansion. We are committed to helping companies of all sizes, across all sectors, overcome their working capital challenges and realise their growth potential.