Shortly after the 2008 financial crisis, a £25m turnover plant hire business found itself with lower margins, short of working capital and in serious arrears on many of its hire purchase agreements. Its bank of many years decided enough was enough and requested that the business move its invoice discounting facility elsewhere.
The various Hire Purchase providers were also looking to be re-financed.
The business approached various alternative banks directly and several commercial finance brokers. By early summer 2009, there was an approved solution available from a major bank; then there was not – the offer was withdrawn. The business was on the brink.
The business kept looking for a solution.
Eventually a UK subsidiary of a Belgian bank expressed an interest. The business had a well-presented plan, a credible three year forecast and good management information. The bank saw the potential and decided to work with the business. Six months later they had developed a new revolving credit facility product, supported by an external tranche of mezzanine finance and the deal was signed and delivered on Christmas Eve 2009.
The business is now a profitable, thriving business with a turnover of over £100m.
Funding: A New Hope
Given the choice between making money doing something straightforward and making money doing something difficult most people choose the straightforward option.
If you are looking to raise money and your requirement fits the criteria for a ‘product’ offered by your bank, you should secure the funding.
If you approach a Commercial Finance Broker who is busy matching funding requests that meet specific criteria against ‘products’ from various lenders that require those characteristics, then you should secure the funding.
If your need is more complex, can only be fulfilled with a mix of products from a number of lenders, and isn’t a perfect match to published lending criteria for those products you may not secure the funding you need.
Fortunately, not all brokers are the same. Even in difficult economic times it is possible to secure funding by finding the right people to help.
In 2020 we, again, find ourselves in a challenging economic environment. Government backed schemes have been introduced to help, banks and other sources of funding want to be seen to help but if your business doesn’t meet the criteria of the ‘product’ it may be difficult to secure the funds your business needs.
Turning to a Commercial Finance Broker should improve your prospects as they have hundreds of different solutions in their locker. Some of these solutions are only available through such brokers so using a broker will give you access to funds that are not otherwise accessible.
If the broker you choose happens to be one of the many who have a ‘sweet’ spot, then they will not consider it worth the effort to shape up your case and find you a solution.
Using more than one broker often does not help your cause as they are likely to both approach the same people. Nothing turns a funder off more than thinking something is being touted round the market.
Difficult is not Impossible
If you are to succeed in raising funds there are some simple rules to follow:
- Prepare thoroughly, make your business case as compelling as you can;
- Secure the support of an advisor who has a wide range of contacts and, most importantly, will genuinely champion your case; and
- Understand that you might have to be flexible to meet the criteria of the funders.
- In our next article we will be outlining five factors that influence a lender to see your business as worth backing.