Getting large-scale funding fast - An invoice finance facility offering £1/2 million a month

The UK defence sector has a budget in the billions - but while major aerospace manufacturers may have financial resources on the same scale, there are many smaller businesses supplying the sector.

These businesses operate on a much smaller scale - but face the usual problems when a small business is dealing with large clients as end customers.

We recently helped a business in the sector solve this problem by sourcing a very large-scale Invoice Finance solution - at very short notice.

The challenge

Defence contracts for aerospace and shipbuilding involve multi-billion pound corporations. However, the majority of defence business does not involve aircraft carriers and fighter jets.  There are many small manufacturers serving the sector that provide niche products, with orders that are in the £thousands rather than £millions.

These firms share all the challenges that face any other small to medium enterprise - but despite the blue-chip status of government customers, the biggest financial challenge of all may actually be cashflow.

Although prices in the defence sector may be generous, and companies are certain of receiving payment, the potential list of customers is limited. Approved governments may be the only potential customers for products that took years to develop.

But, apart from a restricted market, there is an even more serious problem.

Long waits for payment are routine in the defence sector. Even having to wait until a new tax year provides a new purchasing budget before payment is made is not unheard of.

There are other complications 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 many manufacturers that must buy in costly components before they can begin the assembly of their own product, this will inevitably mean tying up a great deal of cash in supplier payments.

A winning tactic

In common with all low-volume manufacturers, businesses in the defence sector must have the right tactics to support their cash flow.

At Rangewell, we have found that the winning tactics can often be an Invoice Finance solution. Any small business that supplies larger businesses - large corporate customers or even governments - can face serious problems with late payments. Large corporations may pay on a quarterly basis. Governments may take even longer.

This means that it may take months between the despatch of a product and the final payment being received

Invoice Finance can accelerate the flow of cash through any business that works with other businesses as its customers.

With an Invoice Finance arrangement, a lender will provide a cash advance as soon as an invoice is issued - the invoice and the status of the customer providing security for the advance. 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.

Instead of waiting months to be paid, cash input keeps pace with business. Staff and suppliers can be paid, and the funds your business needs can always be available.

Does your business invoice other businesses? Do you struggle with late payments? Apply for an Invoice Finance facility or find out how your business could benefit

Making the right alliance

At Rangewell we were recently contacted by a business which specialised in defence communication technology. Their existing Invoice Finance supplier had abruptly ceased trading - which meant an immediate cashflow problem.

They needed to find a new Invoice Finance provider fast - despite having a full order book and a list of blue-chip clients, with no cash coming in they could not keep the factory open. 

But the need to find a new supplier in a matter of days was only part of the problem. The business required a facility offering £500,000 a month.

We were able to step into the gap and find an alternative provider within weeks of the failure of the original lender. A solution 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 the business needed 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.