The serious business of gamingPublished on 4th October 2018 2018-10-04T14:28:39+00:00
The UK has a long history of leading the world with video and computer gaming. It is actually the home of many leading titles, from Grand Theft Auto and Batman Arkham Knight to the Bafta-winning Monument Valley.
It remains a growth industry, and with the global games audience estimated to be around 2.5 billion people and the global software market expected to grow to $180.1 billion by the end of 2021, the opportunities have never been more exciting for those working in the UK games sector.
A growing industry
The UK is the 5th largest video game market in the world, with more than 32 million regular players. It is served by more than 22,000 games companies in the UK, working on all types of platforms, from the traditional PC and consoles to mobile, and on exciting new sectors such as VR / AR, and Artificial Intelligence.
Its importance to the UK Economy is reflected by the governments’ Video Games Tax Relief (VGTR) concession, designed to boost the sector still further.
At Rangewell, we are also keen to encourage businesses in the games sector and to provide the funding they need.
What’s behind a successful games business?
Games businesses are based on the passion of their founders but, like any other business, they depend on funding. You will need high-powered purpose-built workstations with multiple monitors. There will also be substantial costs for software, as well as all the usual business equipment.
However, one of the attractions of the games industry is that it is possible to start small. A full production multi-console game could take a team of developers and artists years to create, and have costs similar to a cinema feature film. But that kind of investment is not required to make an impact if you have the necessary skills. A simple Android or IOS game could be done by a single person by investing just their time.
It means that a games business with a successful title could be in a position to grow very rapidly. But what is the best way to fund growth?
Conventional funding is suited to conventional businesses – where products are sold, and income comes in almost from the day they open their doors. The games industry is very different. You need innovative solutions that can help you get through months or even years of development time.
We have found that the funding solution for many clients in the games industry is Invoice Finance.
Dealing with slow payers
The challenge most games developers face is not the delay caused while a title is developed - this can be planned for. The problem is that after shipping a title, payment can be slow coming in.
Large retailers, in particular, may have long payment arrangements, which can leave games developers short of the funds they need to work on the next title.
This had become a real problem for a games developer that we recently worked with.
“We had plenty of people keen to play our games, but it seemed to take months to get paid.”
The business simply did not have the necessary cash reserves, and the problem was getting worse, the more successful they became.
“More complex games mean longer and more complex development. We had to find a way to fund it - but most banks and other lenders seem scared of our type of business - in fact, of the whole games industry.”
The client’s view is based on experience - despite the profitability and importance of the sector, many lenders simply do not understand the challenges or the opportunities that it presents.
With Invoice Finance, a funding provider will use the invoices your company issues as the security for cash advances. So, instead of waiting for distributors and retailers to pay, our client could have the cash as soon as they shipped a title.
It also helped ensure they always had the funds they needed to support further growth.
Invoice Factoring - a complete solution
There are several types of Invoice Funding to consider, but we believed our games developer client needed an Invoice Factoring arrangement - because of the extra benefits it offers them as a small business.
With Invoice Factoring, you send a copy of every invoice your business issues to the finance provider as well as your customers. The finance provider then takes care of the debt.
First, they pay you a percentage - usually 85% of the total value - as soon as the invoice is received. Then they collect the full amount from all your customers. Once they receive the payment, they then send you your remaining balance - 15% - less their interest charges and fees.
We helped set up an Invoice Funding facility of £180,000 - large enough to help our client through the development cycle to release the next title.
Your customers will know your business is using Invoice Finance, but you will have the advantage of highly professional credit management, with collection and credit checking at no extra cost. It means outsourcing all the activities of credit control, freeing up your time for your core business.
At Rangewell, we work closely with our clients to understand their needs before we recommend a particular type of finance. If you are thinking about an Invoice Finance solution, talk to our experts. Our service - and their expertise - is absolutely free.
If your small business works to provide goods or services to large businesses, late payments could put pressure on your cash flow. Call us to see how Invoice Finance could provide the answers you need, and which type of facility is right for you.
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