Funding for the defence sectorPublished on 3rd September 2018 2018-09-03T11:07:49+00:00 - Last update on 11th September 2018 2018-09-11T15:32:17+00:00
The UK defence sector has a budget in the billions - but many of the businesses involved in it still face issues with their own funding. While the headline-grabbing contracts for aerospace and shipbuilding are the province of multi-billion pound corporations, there are many manufacturers in the sector that provide highly sophisticated niche products, with orders that are in the £thousands rather than £millions. These firms have turnovers that are very much smaller and share all the challenges that face any other small to medium enterprise.
They also face some issues of their own. Costs are high. Security may be essential for a defence contract, and R&D may need cutting-edge skills.
However, the biggest financial challenge may be cashflow
Although with blue-chip government clients prices may be generous and companies are certain of receiving payment, the customer base is limited to responsible governments and, in some cases, to law enforcement organisations. And, with a restricted customer base, they are at the mercy of the payment procedures of the various purchasing authorities.
Long waits for payment are routine and even having to wait until a new tax year provides a new purchasing budget is not unheard of.
There are other complications that are unique to the defence sector too. These often include issues with permits in the case of export orders. Having a consignment ready to ship but made to stand waiting whilst paperwork is put in order means further frustrating, and costly delays. For manufacturers that must buy in components before assembling their own product, this can mean tying up a great deal of cash in payment to suppliers.
A winning tactic
As with all low-volume manufacturing in the UK, the defence sector needs the right tactics to support cash flow.
Any small businesses supplying larger business - large corporate customers or governments - can face many problems with late payments. It could take months between the assembly and despatch of a product and the final payment being received.
At Rangewell, we have found that the answer to this often lies with an Invoice Finance solution. Invoice Finance can accelerate the flow of cash through your business because, with an Invoice Finance arrangement, the lender will provide a cash advance as soon as an invoice is issued.
This can mean that a manufacturer will receive 90% of the value of each invoice they issue when they issue it, with the remainder coming through once the client pays, less the lender’s fees for the service.
Staff and suppliers of all kinds can be paid, and the funds your business needs can always be available.
Making the right alliance
At Rangewell we have many clients in the defence sector. We were recently contacted by another client which specialised in defence communication technology. Their existing Invoice Finance supplier had abruptly ceased trading - which meant an immediate cashflow problem.
We were able to step into the gap and find an alternative provider within weeks of the failure of the original lender. A facility offering £150,000 a month was required and, thanks to our contacts across the entire UK lending market, we were not only able to find a new lender able to offer the scale of funding required but we were able to do it at a cost below that of the original supplier.
Whatever your sector, if you think Invoice Finance could be the solution your business is looking for, apply today or find out more with Rangewell.
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