Access to finance for SME manufacturers


In the fifth of a series of blogs looking at the manufacturing sector, Moore and Smalley’s Ginni Cooper discusses access to finance for manufacturers.


Access to affordable finance continues to frustrate ambitious SME manufacturers. Only 40 per cent of small businesses used external finance in the third quarter of 2012, according to the SME Finance Monitor report, compared with 51 per cent in the previous quarter.


So what funding options are open to growing SME manufacturers?


Government-backed schemes


A government-funded small business bank was announced in September with the aim of enabling small firms to access finance. This bank would operate through the wholesale market to support loans and long-term capital investments for small businesses from existing banks and fund providers.


Another funding initiative is the Treasury’s Funding For Lending Scheme, run in partnership with the Bank of England. This was set up in July to increase SME business lending by allowing banks and building societies borrow from the Bank of England for up to four years.


Debt funding


Debt funding packages may be more affordable following the latest raft of measures aimed at smaller businesses. To obtain this type of funding, you must demonstrate strong cash flows to convince the bank you can service the loan.


Invoice discounting and stock finance


Invoice discounting is readily available and ideal for established growing businesses because it links your sales ledger directly to your credit facility, so funding grows in direct proportion to business expansion.


Private equity and venture capital


PE and VC funders become an investor in your business. This means they take a share of the profits, which arguably makes it expensive. PE/VC funds are available, but you must have very strong growth prospects. Businesses can flourish as a result of the strategic expertise that PE/VC funders bring.


Alternative funding


Alternative funding includes Lancashire County Council’s Rosebud Fund; business angels; and the North West Fund. Another source is peer to peer lending, which matches business and individuals who want to invest with businesses looking to borrow. Alternative funding can be useful for topping up funding needs, but it’s by no means straightforward, especially where public funds are involved.


Your professional advisor will be able to give you more information on the funding options available to your business.


For more information, contact Ginni Cooper on 01772 821021.