Asset Backed Lending

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One of the quickest and easier ways to raise finance to fund growth is to ‘sweat’ the existing assets of the business by raising finance that is secured against those assets. Collectively known as ‘asset finance’ this type of funding comes in many shapes and sizes most which share the common feature that the finance is secured (charged) against an asset of the business.

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Property Mortgage

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Perhaps the best-known form of asset finance is a mortgage on the property assets of the business. Not unlike its residential counterpart the lender will be interested in the value of the property (security) and for the applicant to demonstrate that they have a track record of generating sufficient profit to repay (service) the loan. The amount that may be borrowed against a business property asset (known as the loan-to-asset ratio or LAV) will vary from lender to lender as will the other terms (covenants) that are required.

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Jerroms has a dedicated team of property asset experts and where this type of finance is to be combined with other types of finance (blended) this team will work closely with the Jerroms Corporate Finance team to secure the optimum mix.

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Fixed Asset Finance

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Possibly the next best known class of asset finance is funding made available through hire-purchase or asset leasing agreements. This is where vehicles, plant & equipment, computer/telephony equipment and sometimes even intangible assets like software are purchased with the support of external finance. The legal and accounting implications (including the issue of ‘who owns’ the asset) of each of the different types of fixed asset finance agreements vary from agreement to agreement; and if you are unclear on these points then professional advice is strongly recommended before you sign an agreement. The market for fixed asset finance is also highly competitive so shopping around for the best deal is recommended.

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Jerroms has a dedicated team of property asset experts and where this type of finance is to be combined with other types of finance (blended) this team will work closely with the Jerroms Corporate Finance team to secure the optimum mix.

Trade Finance

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Success in business is often determined by the careful management of cash. Many businesses fail because they run out of cash, even though they may have significant amounts owed to them by their customers.  Bridging the gap between the point at which an invoice is raised and the time that payment is received can be difficult.  For this very reason the use of trade finance schemes such as Invoice Discounting and Factoring are of huge benefit.  Using an Invoice Financing facility can massively improve your cash flow by releasing money as early in the process as possible after the order has been completed.

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Invoice Discounting and Factoring are useful options for:

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• Business Start Up – offers flexible finance to get your new company off the ground.
• Growing businesses – puts cash back to work for your business as soon as you’ve earned it.
• Struggling businesses – bridges the gap between invoicing your customers and getting paid.
  

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In addition to the increased flexibility improved cash flow offers businesses, other key advantages and benefits gained from Invoice Discounting and Factoring include:

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• Releasing up to 90% of the value of your outstanding invoices within 24 hours
• Funding can be secured without requiring other assets
• Cash is freed up to overcome cash flow problems or grow the business
• The level of funding available increases with your turnover
• Paying supplier invoices promptly increases your power to negotiate discounts
• Invoice Discounting and Factoring services are competitively priced

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Whether you choose Invoice Discounting or Factoring will largely depend on the size of your business and your sales ledger management resources. If your business is relatively small and your human resources limited, the credit control and collection service that comes with Factoring is likely to suit you better. If your business is larger, and you have the human and information resources to efficiently manage your own sales ledger and debt collection – or if you feel strongly that you want your own company to deal with debt collection – Invoice Discounting is likely to be your preferred option.

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If you believe Invoice Discounting or Factoring could benefit your business, or if you have been using this facility but not reviewed your existing rates recently, then contact our team of friendly and professional experts who have a wide knowledge of the key providers in the Invoice Financing market.   We offer a free consultation service to help small and medium size business owners ensure they really do get the best deal.

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Export Trade Finance

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The working capital implications of trading with customers abroad can be even more daunting than those associated with that of UK customers. In addition to the challenge associated with financing your goods for the duration of their transportation by air, road or sea; comes the additional risks posed by foreign currency fluctuations and collecting debts from overseas customers. To assist with these challenges there are a range of export trade finance options. These include letters of credit, bonds, guarantees and working capital loans. Some of these options will potentially free up finance when the goods leave your factory gate/premises and others will underwrite the risk associated with foreign currency fluctuation and/or insure the risk of non-payment.

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If you believe Export Trade Finance could benefit your business then contact our team of friendly and professional experts who have a wide knowledge of the key providers in the Export Finance market.   We offer a free consultation service to help small and medium size business owners ensure they really do get the best deal.

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Cash Flow Finance

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In certain circumstances a business may be able to take out a loan that does not rely upon the security offered by one specific asset; instead the finance is secured upon the cash-flows generated by the business. This type of finance is especially well suited to businesses that have few assets (asset-poor) but can demonstrate a track record of having generated consistent profits. In a World where many modern businesses are virtual/trade on-line and their asset base comprises little more than computer equipment and inventory; this type of finance is increasingly popular.

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It is worth noting that the fact that a charge is not taken against a specific asset does not make this type of finance unsecured. In most cases a cash-flow loan will be supported by what is known as a ‘fixed and floating charge’ and this means that the lender has security over all of the fixed assets (computers, desks, chairs etc.) and the working capital assets (debtors, receivables, inventory etc.) of the business.

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An application for Cash Flow Finance will be typically more complex and involved than for almost any other form of asset funding. It will commonly call upon the applicant to set-out detailed historic financial data (to show a track record of profits), detailed balance sheet data and a financial forecast (usually not less than 3 years ahead).

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There are fewer providers of Cash Flow Finance than most of the other form of asset funding but there are still a considerable number of funders and the terms offered (including the amount, repayment terms, interest, restrictions and covenants) will vary.

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Cash Flow Finance is a complex financial instrument and professional assistance with an application for this type of funding is recommended.

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If you believe Cash Flow Finance could benefit your business then contact our team of friendly and professional experts who have wide knowledge of the key providers in the market.   We offer a free consultation service to help small and medium size business owners ensure they really do get the best deal.

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Peer to Peer Lending

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Businesses that had perhaps previously adopted a more defensive position on the borrowing front are now seeking alternative ways to bank finance to achieve their funding requirements, and a sector that is experiencing increased interest is Peer-to-peer (P2P) lending

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What is Peer-to-peer lending?

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Peer-to-peer lending is the practice of online auction-based money lending to unrelated individuals or businesses, “peers”, without going through traditional financial intermediaries such as a bank or other financial institutions.  Peer-to-peer lending providers facilitate the provision of loans to businesses and property developers through a network of investors.

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Why it is beneficial to both lenders and borrowers?

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Lenders can potentially earn more from their investments than they would from a high street saving account. Lenders normally seek some security for their lending as they are not covered by the Financial Services Compensation Scheme. Peer-to-peer lenders include; Assetz Capital, Funding Circle, Ratesetter and Zopa.

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Borrowers may be able to receive funds that they would not be able to otherwise obtain from high street banks. Funds can also be obtained quite quickly once full details have been supplied to the loan provider. Funds can be used for growing the business, working capital, buying an asset or developing a property.

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Financial Fitness: Steps to a brighter future for your business Webinar

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It is important to review the financial status of your business, to determine if you require additional finance or restructuring of your existing finance, to make sure you’re on the right track to help with future decisions. Now is the time to re-evaluate, re-enforce or change financial strategies as we look beyond Covid-19.  Your funding structure can either trip you up or enhance your growth – we can help you work out which is which.