As we approach a crucial juncture for the UK economy, it is imperative that business owners focus on their working capital requirements.
 
Cashflow under pressure
The latest Working Capital Index report by Lloyds Bank shows that a third of firms surveyed by IHS Markit said managing working capital, in the context of political and business uncertainty was "the biggest concern for the year ahead".
 
Drilling down into these figures further shows that 29% of manufacturers surveyed said they were holding more stock - presumably because of any disruption caused by Brexit. Stockpiling puts company's cashflow under significant stress and is funding that could be spent on expanding the business. It also affects changes to a business's operating model. One firm mentioned in the Lloyds report said that it has established a new warehouse so that it could better manage its supply chain in Europe.
 
Short term gain - long term pain?
In May, the CBI Industrial Trends Survey showed that 35% of firms surveyed said their present stocks of finished goods were more than adequate, whilst 9% said they were less than adequate, giving a balance of 25% – the highest balance since March 2009 and noticeably above the long-run average (+13%).
 
However, there remains a dichotomy here as many firms surveyed by Lloyds expected stock to run down next year, meaning they are impacting their cashflow now for relatively short-term gains.
 
Stockpiling is expensive for businesses, but it did boost GDP growth in late 2018 and in the first six months of this year. However, many fear that it will have an impact on growth and GDP figures in the rest of the year. With this in mind it would not be surprise to see the UK economy experience slower growth than normal while companies use up the extra stock they now have.
 
Slowdown in turnover generation
The Lloyds Bank Capital Working Index shows that the near-9,000 companies that surveyed saw their combined working capital increase by almost 41% over the last four years - equivalent to £41.1bn. However, over the same period, revenue at the firms grew by only 20%, meaning that they are holding onto more working capital than is relative to their turnover.
 
Meanwhile, over the last three years, the report found that the average cash conversion cycle, a measure of working capital efficiency, for larger firms has increased by just over six days in the last three and at smaller firms by nearly two days.
 
These figures show that firms are now holding higher levels of working capital and that generating turnover is taking longer. Worryingly, SMEs are taking seven days longer to tie up cash than their larger counterparts. However, this is down from a record high of almost 12 days.
 
The stockpiling of goods isn't an issue that is going away in the short-term, it seems. The Working Capital Index points out that high inventory levels have hit historic highs over the last quarter.
 
Going back further, and Lloyds' analysis shows that over the last three years (or since the vote to leave the EU), total inventory for the firms surveyed leapt by almost £35bn, or 29.2%.
 
In 2016 the annual rate of growth was 12.6% but this has slowed to 5.6% in 2018. This has meant that stockpiling has been at the forefront of the mind for business owners. While many expected the political uncertainty surrounded Brexit to be over by now and these stocks to have run down, a Catch 22 situation has arisen with continued uncertainty meaning that the extra inventory is carrying a cost both in terms of working capital that needs financing, logistics and storage charges.
 
Review every option
It now seems certain that the UK will leave the EU on 31 October, but that remains the only certainty, with the outcome of the decision yet to be felt.
 
Preparation, then, is crucial. With cashflow and management of working capital critical over the coming months, now is the time to review your financing options and plan ahead for all eventualities post-October 2019.
 
Ask yourself this: do you have a full understanding of the processes in your business that will unleash the cashflow you need to make your business grow?
 
If the answer is no, then now is the time to take action to remedy this shortfall, as cashflow is critical when enacting change for your business.

This article has also been featured in BDaily 
https://bdaily.co.uk/articles/2019/07/22/taking-stock-why-cash-is-king
and Business Money 
http://www.business-money.com/announcements/taking-stock-why-cash-is-king

​Starting a new job can be difficult for anyone, especially when moving to a new company and even more so when starting in a completely new industry. My background is in public sector finance, starting in The Office of the Police and Crime Commissioner for Thames Valley (OPCC) as an Apprentice Finance Officer studying Association of Accounting Technicians (AAT) level 2. One promotion, three qualifications, three and a half years later I decided to make the leap into the unknown.
 
The private sector offers a much more open and rewarding environment for creativity and proactivity. Since joining Liquidity Club I have been learning from the experienced team around me getting stuck in where I can writing case studies, visiting clients and understanding their business.
 
I look forward meeting business owners over the coming months and begin not only supporting the team but running with my own work and ultimately servicing my own clients, particularly on the loans side of Liquidity Club. After 2 exciting months, I have started to ask the right questions and take the initiative. I know that I’ve made the right career move for me, it is true that not everyone is the same, but if you are prepared to take risks put yourself outside of your comfort zone you will only grow as a person.

One of things that can be overlooked by businesses (particularly smaller businesses) when looking to raise funding for growth is the structure of funding and how it impacts the day-to-day running of the company.

According to the recent SME Finance Monitor released by the BVA BDRC (March 2019), the main issue facing SMEs when raising finance has now shifted from the issue of access to finance, to demand for finance amongst SMEs and the extent to which the correct forms of funding are available to those businesses looking to grow and invest.

According to the report, 36% of SMEs were using external finance in 2018 compared to a similar figure of 38% in 2018. So why is structure not a more prominent question for business owners? Has an abundance of different types of funding created choice paralysis? Or maybe there is still too much jargon and the types of products available still confuse people.

A recent survey of 1000 businesses undertaken by Marketinvoice suggests just 1 in 10 would look to fund growth with a business loan.

Rather, amongst the surveyed businesses, more than a quarter (26%) favoured invoice finance, followed by asset-based finance (22%). Aside from debt, businesses were typically reluctant to cede control to equity or venture capital investment, with just 6% having used this method of funding to boost growth and valuation. 

Will Mason of Liquidity Club is more guarded around specific product focus, including invoice finance, ABL or business loans:
"Businesses must be wary of the ways in which they borrow and what security is offered to ensure that they remain flexible both in times of need and in times of success. For asset rich businesses the ideal growth funding might be secured, but there are many service based businesses for whom secured lending does not work and other options must be explored."

"This is why we recommend all businesses speak with an advisor when considering their financial structure and debt needs, bringing in their future plans but also taking time to consider the worst case scenarios".

To speak with us today please contact Will or the team here.

To read more about the Marketinvoice survey, click on the links below:
https://www.verdict.co.uk/leasing-life/news/sme-growth-limited-lack-finance/
http://www.p2pfinancenews.co.uk/2019/06/24/marketinvoice-smes-favouring-invoice-finance-over-business-loans-to-help-them-grow/
​

PGI Seating Solutions is focused on future growth and new contract wins after receiving a six-figure funding working capital facility. Liquidity Club has arranged and advised the deal with Positive Cashflow Finance acting as the funders.

PGI Seating Solutions manufactures and installs specialist fixed seating and bespoke contract furniture. PGI Seating Solutions specialises in all aspects of fixed seating such as bench seating, booth seating, restaurant and bar seating and banquette seating. The business quickly established a reputation for niche contract work to provide seating solutions for pubs, universities and larger corporates. Today the company employs 12 people.
PGI Seating Solutions has enjoyed steady growth and the working capital facility provided is helping to support PGI Seating Solutions future growth strategy and day to day operational requirements.

Paul Gavillet, Managing Director PGI Seating Solutions said: “We’ve built a superb reputation and are delighted to have fashioned and furnished hundreds of booth, bench and banquette seating systems for clients across the UK. Our key focus is on providing quality and we are proud of our gifted team of upholsterers, joiners, machinists and polishers. We have enjoyed steady growth and thanks to this new finance facility we can grow the business further with confidence and fulfil new contracts. We have been very happy with the guidance provided by Chris Carter at Liquidity Club and Andy Hume at Positive Cashflow Finance.”

Liquidity Club continues to expand its team in Birmingham, with Cameron Leitelmayer (above: back left) joining as an associate. Cameron will support both sales and operations functions, working with our existing team to help businesses raise funding for their current and future needs.

Cameron brings with him practical financial experience, having previously worked for The Office of the Police and Crime Commissioner (PCC) for Thames Valley as an Apprentice Assistant Accountant completing AAT qualifications Level 2, 3 & 4 as well as being an apprentice ambassador for Oxfordshire Apprenticeships. Cameron was awarded The Freemen of Oxford Accountancy Apprentice of the Year in 2018.

Socially Cameron plays for Helmdon Cricket Club, winning back to back promotions in the past 2 years. 

The working capital facility was structured by Adam Myers at Ultimate Finance, who worked with Adam Simpson at the Liquidity Club to tailor a finance package to support SLP’s growth strategy to move the business forward to expand with new projects in the rail sector and increase profits. The working capital line includes a revolving facility that provides flexibility for SLP to access funding when it is needed to assist new contract wins and growth opportunities.

​Duncan Proctor, Managing Director SLP said: “The new funding package puts SLP in a strong position for continued growth and will support new contract wins and our ability to drive forward the business. We have recently expanded our sales team which further strengthens our ability and desire to increase our customer base across the UK.  We want to be the best at what we do – which is why we’ve invested in our people and use the latest technology, enabling us to deliver projects on time and to specification."

​“I have been impressed by the support provided by Adam Simpson at Liquidity Club. He has been first class. The whole process has been much easier because Adam reviewed the funding options and introduced us to the right funding partner. As a result, we have worked with Adam Myers at Ultimate Finance and received the funding boost we needed to support our growth.”

SLP is winning exciting new contracts in the rail industry and the funding that we’ve provided means they can maximise those opportunities. ​We were able to offer Duncan  and his team an increased finance package that provides extra security to continue pursuing their growth plans with confidence.  Working with Duncan and Adam at Liquidity Club, has been a pleasure.” ​

​The company has notable clients across the commercial and public sectors including major retailers, managed service providers, education and government.

Liquidity Club met with Gwyn Hicks, COO and CFO of Hardware.com, to understand the plans for growth and capital requirements for the long-term. The result was an introduction to Secure Trust Bank who provided a facility that better met the needs of the business than their incumbent provider.

David Parsons, Regional MD at Secure Trust Bank further added: "Hardware.com's value-added offering has helped it secure contracts with blue-chip customers across the globe. With this new line of funding, the business can invest in new services to allow it to scale up and bring in new revenue streams. We're keen to support Hardware UK, and look forward to seeing the company progress in the coming years."

​I’m a man that doesn’t ‘do things by half’ and I take that approach into every aspect in my life! In my view, there is no point doing something if you’re not giving that something 100%. 

Preparation 
We've all heard the phrase “Abs are made in the kitchen”. Starting a new role and fitting in a training plan has been intense, especially trying to reconnect with all my contacts across the North West region. Planning my diary to maximise efficiency is a crucial part of success. The same approach can be taken with your finances. Planning for peaks and troughs in cashflows and seeking help early can avoid larger issues down the line.

Time management 
‘Don’t be a busy fool’ - organising your diary and determining where you need to be is a full-time job in itself!  Throw travel and rush hour traffic into the mix, and your days can quickly become shorter and less efficient. If you are looking at fundraising for your business, is meeting multiple lenders to compare really the best use of your time? Why not focus on running the business instead and leave an expert partner to manage this, maximising the time available to you?

Review the plan 
Many businesses set out their annual financial objectives once - at the start of the calendar year or start of their financial year. Even plans made with the best intentions should adapt as time moves on, and the end objectives change. It is good practice to take stock of how your business is performing towards your target and does anything have to be changed to achieve this? Don’t be afraid to amend this where needed. Missing an occasional training run will not be the end of the world – life does get in the way!

We at Liquidity Club have the market expertise to advise the SME market for their funding needs and business goals. With access to the full financial spectrum we are fully prepared to help and would welcome the opportunity to support your SME contacts where possible.

It is for the value of one hundred and fifty pounds , fifteen shillings and seven pence halfpenny (equivalent to £21,580 today)

It is in fact a simple assignment of book debts, precisely the mechanism we still use today in an invoice financing arrangement, drawn up before the Napoleonic Wars. More than that it was the classic case of individuals (not a bank or business) joining together to provide a loan to someone with cash flow problems. So you could say a forerunner of today’s Peer-to-Peer Lending!

I've spent over 35 years in the asset based lending industry and I've seen a number of significant changes but it seems we may have come full circle. During the early '80s most players were small independent houses often with a merchant banking background. Operationally as funders we were very much paper driven.

Gradually the main clearing banks began to extend their reach to put invoice finance alongside traditional overdrafts. Over the next few years Asset Based Lending was introduced by one or two US funders, until it became and now remains widely available. In the 21st century 'fintech' has taken off even further and the days of paper are now long gone with most data transferring electronically. Some funders in the current market claim to analyses hundreds of thousands of data points in making lending decisions, most of which are accessed without the client needing to lift a finger.

In a nutshell this is what is so exciting about joining Liquidity Club.

After 35 years in the lending world, working within given parameters and product sets, I now have the opportunity to look across the market for solutions to a range of funding problems that we are presented with. From trade finance, invoice finance and full ABL, to tax credits of R&D expenditure and overpayments in Stamp Duty; in short there aren't many funding requirements that we cannot present a solution for.

To learn more or for assistance raising finance for your business please contact Tim or one of the team here

Tim Corbett