Alternative finance boosting manufacturersPublished on 17th May 2017 2017-05-17T20:55:34+00:00 - Last update on 27th November 2018 2018-11-27T09:24:09+00:00
Manufacturers in the UK are continuing to display their strength and resilience in spite of modern politics and economic uncertainty. According to the Confederation of British Industry, manufacturers are as defiant as ever and, with a surge of good fortune, hitting a 6 year high. However, manufacturers can’t afford to rest on their laurels, there’s still much work to be done and little enough time to do it.
With average output at an all-time high, it’s time to make sure that your manufacturing business has everything it needs to go forward and excel. No doubt driven by increased demand for British-made goods, manufacturing isn’t the only industry seeing an increase. There’s also an increased demand for British craft beers, food and textiles too. But what you’re probably wanting to know is how best to take advantage and ensure your business’ long-term growth and sustainability? Well, the answer is simple. Alternative Business Finance!
What is Alternative Finance?
If you think that your traditional high street bank is your one-stop shop for business finance, I’m pleased to tell that you’re sorely mistaken. Ever since the 2008 Banking Crisis, many major high street banks have been confronted with large fines and increased regulations. As a consequence, high street banks are now turning away from SME businesses and setting their gaze firmly on big business instead. Left with nothing else but an ever-expanding rift between them and business finance, many business owners feel stranded, crying out for more help and financial support.
But all is not lost. The alternative finance sector can help your manufacturing business further its goals and attain ever greater feats. Alternative finance is simply business finance offered by anyone other than your high street bank, exposing your business to a whole wealth of finance products all waiting to get plucked and put to good use. However, with thousands upon thousands of finance solutions to choose from, how can you be certain you’re getting the right product for your manufacturing business?
This is where the finance extraordinaires at Rangewell can help. With our services and expertise, you could gain access to a wide range of diverse business finance products to suit your exact needs, including Business Loans, Leasing Agreements, Hire Purchase solutions and much, much, more!
Business Loans are an excellent way of acquiring a lump sum or cash injection for your manufacturing business. They can be used for a wide range of reasons including asset purchases, premises refurbishments, cash injects and so on. Loans typically arrive secured or unsecured and are either short or long-term solutions lasting between 1-3 years or 3-6 years and beyond. Throughout the term, you will be required to make fixed monthly repayments, plus interest. Repayments are calculated using: capital, term length and interest.
- With an Unsecured loan, your business could gain a lump sum in the region of £5,000 to £250,000. Should your business fall behind in making repayments, lenders can’t seize assets. However, it would affect your credit score, making it much harder and more expensive to secure finance in the future.
- On the other hand, Secured loans can grant you access to a sizeable lump sum ranging from £5,000 to as much as £1,000,000. However, should you fail to keep up with the fixed monthly repayments, the lender can seize assets in order to recover the remaining amount.
Leasing Agreements are a method of finance that allows you to use manufacturing equipment for a temporary period. Such agreements tend to last between 1-5 years but could be stretched to 7 years if the equipment is very expensive. Depending on the type of lease, the asset may or may not appear on your business’ balance sheet. It’s also worth noting that rental payments may incur VAT which could be reclaimed on a quarterly basis. When talking about leasing agreements, you need to fully understand and appreciate the differences between the two types - Operating and Finance.
Operating: leases cover only a portion of the equipment’s working life in exchange for a fixed monthly rent, so might not appear on your balance sheet. Rental costs take into account the usage of the equipment and the future predicted value at the end of the agreement. Operating leases work by the lender renting it to you for an agreed term. Unless you have set up a separate agreement with the supplier, you will be responsible for its maintenance and upkeep. Subject to conditions, at the end of the leasing agreement you can choose to either return or continue leasing the asset for a nominal fee at the lessor’s discretion.
- Finance: leases work differently. This time, the agreement now covers most or the entire working life of the equipment in question. Again, it works by the lender purchasing the asset and renting it to you for an agreed term. Throughout the agreement, you are responsible for the asset’s maintenance and upkeep and must pay fixed monthly rental charges that take into account use of the equipment and its future predicted value at the end of the contract. Subject to conditions, once the term expires you can either return the asset, extend the term or upgrade to a higher model.
Hire Purchase is a great method of finance that’s often used by manufacturers and warehouse operators to construction firms in order to secure valuable pieces of equipment. Its popularity stems from the ability to become the equipment’s eventual owner. Hire Purchase solutions work by the lender purchasing the equipment from a lender on your behalf and letting you make use of it in exchange for regular fixed monthly repayments, plus interest. However, before you can use the equipment you must first pay the lender an ‘initial deposit.’ An initial deposit typically covers the full VAT and around 10% of the asset’s cost, although this is negotiable depending on the circumstance. Repayments are calculated over the course of the agreed term, incorporating both the capital and interest. Providing all the repayments have been concluded, ownership of the asset is handed over to you.
Our services are simple, we’re on your side
At Rangewell, our services are clear and transparent. We support a wide range of SME businesses of every shape and size, for finding every type of finance. Follow us on Twitter and LinkedIn for business tips and tricks, and feel free to call us on 0203 637 2340 if you’d like to chat about what we can do for you.
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