Upload
claude-clark
View
219
Download
0
Tags:
Embed Size (px)
Citation preview
Funding Business GrowthOptions available to
businesses
Challenges Facing UK Business
29.6m people in employment in
the UK
13.6m employed by SMEs
45% of employment
Combined revenues of
£1.6tn
Since 2008 the SME sector has suffered a lending decline of 40%
UK economy is about SMEs
Scenario
Finished Goods
Gross margin of 35%
A business has won a substantial new order and is examining the options available to it to finance the order
Substantial businesses
Good credit
Manufactured outside the UK
Established supplier
Approximately 90 days
The Order
The Goods
The End Customer
The Trading Cycle
Traditional Sources Of Finance
Loans Mortgage
Supplier
Customer
Sell shares
Shareholder investmentBank Lending
Shareholder Finance
Negotiating Payment Terms
Internally Generated CashReduce cost
Restructure
Equity Finance
Traditional SourcesBank Lending
Loans/Overdraft
Import/Export loans
Invoice discounting
When security is fully utilised, no additional lending will be available
Typical Banking Products
Banks Lend Against Security
Traditional SourcesInternal
Improve efficiency
Reduce costs Refinancing unencumbered assets
Cost Availability
Permanence
Risk
Release Cash In The Business
Shareholders Loans
Traditional SourcesExternal
Cost Valuation
Control issues
Timing
Equity Finance
Payment Terms - SupplierExtended payment terms
Profit share
Payment Terms - CustomerEarly payment discounts
True Trade FinanceWhat is true trade finance
Ability to fund the supply chain without taking on debt or selling equityThe fundamental difference is that true trade finance is not lending; its tradingA true trade financier takes genuine risk by buying goods against confirmed purchase orders
Scenario RevisitedIt was a true example
3 years old
Substantial new orders
Finished goodsdesigned in the UK
Manufacturedin China
Nearly doubling of revenueThe Business
The Order
The Goods The End CustomersMajor high street retailers
Good credit
The problemBank unable to extend further
financeSupplier demanding large deposit
The Trade Finance Solution
The Trade Finance SolutionKey Differentiators
Against confirmed purchase orders
Typically use of letters of credit
Trade financier enters into the supply chain
Ability To Open Purchase Commitments
End to End Supply Chain Finance
Physically Trading Of Goods
Transactional FinancePay when used
Goods That Have Been Funded by TFP
• Gas BBQs• Pizza boxes• Bluetooth keyboards• Seasonal giftware• Homeware• Iron ore• Used vegetable oil
• Baby clothing• Commercial batteries• Replacement
windscreens• Components for
hydro-power stations• High resolution
surveillance cameras• Garden games• Recycling equipment• Components for oil
industry• Woodchip/biomass
When It Goes Wrong
We have to accept that things do go wrong
Work with client to mitigate loss
Marine and credit insuranceWe Take Risk
Insurance
Communication SecurityThrough ownership of the goods
Knowledge and Experience
Due DiligenceDebentures
Warranties
ConclusionAll things to all people; there is no one size fits all
It is essential to understand the limitations of solutions as it is to understand the benefits
More than one product may be required to solve the funding challengeBusiness people must ensure they are aware of solutions available and how to use them