Yes, you can! Helping a start-up with a canning line

When your business is a startup or has only been trading a few months, it can be difficult to get the funding you need. There are plenty of lenders out there with money to lend – but many traditional lenders only lend to established businesses with years of audited accounts.

Since the credit crunch, the banks – which used to provide funding to get many new businesses off the ground – only seem to provide funding to established firms. Their lending criteria seem to be set in stone – and if your business does not meet them all, it won’t be getting funding.

Even the new breed of online business lenders will usually want online accounts and VAT returns before they will consider an application.

But there are solutions – which can provide a lifeline to your new business.

We recently helped a new company find a solution which would help them get their canned drinks business on a sound footing. They had outsourced the initial production and canning to an outside contract supplier but, to make the business profitable, they would need to set up a mixing and canning line.

“I had a list of customers ready to buy my new brand of canned cocktails, but I didn’t have any way of producing them in volume - and despite a full order book, lenders would not help me because I had not been in business for long enough”

Why won’t lenders lend?

Lenders make their money by lending money – not by keeping it. But they must base their lending decisions on the risk that they see from a business making the application.

If yours is a new business with no trading history, they have no evidence that it will succeed. They will see this as presenting the risk that you will not be able to repay. Lenders who set their criteria too high will simply not lend to you - and many of those that do may demand high rates of interest in return.

You can have a great business idea and customers ready and waiting to do business with you but, without funding, you may not be able to afford the equipment and vehicles you need to start work.

“I saw that my best answer would be a semi-automated 4-head filler. It could fill and seal around 40 cans per minute - it was a much higher capacity than I need at the minute, but I have my eye on the future. I only need to get a major supermarket to carry my range and I will be running it around the clock. But it would cost around £30,000 which is money I just don’t have.”

However, there are two ways to get around this problem and pay for the tools you need to do the job.

The first is with a Secured Loan. Putting up assets, such as your home, as ‘security’ means that the lender has a right to take them if your business is unable to make the repayments. This reduces the lender’s risk, making it more likely that they will be able to offer you the funds you want for your business.

There are also providers of Startup Finance which specialise in this type of funding.

“I didn’t have a property that I could use as security, and I had already borrowed to get the business off the ground. I needed another solution, and I needed to find it quickly before the initial interest in my range evaporated.”

Putting a home on the line might be too uncomfortable for many people. Fortunately, there is another way to provide security - with Asset Finance - which can be a cost-effective way to spread the cost of the equipment you must have to work. 

Asset Funding provides a type of secured lending - but the security is provided by the asset, or equipment, itself. If a company cannot keep up repayments on the funding agreement, the lender can simply repossess the asset and sell it - and so recover their money. It reduces the risk to the lender which, in turn, means they can cut the cost of the loan. 

It can be a cost-effective answer to provide all types of equipment and vehicles - including manufacturing equipment. We recognised that it could help our client provide the canning line he needed.  

There are actually several types of Asset Finance

Hire Purchase

Hire Purchase provides a simple way to spread the cost of buying an asset. You pay a deposit plus fixed monthly instalments for an agreed term, which generally lasts between 12 and 72 months.

The assets become your property as soon as the final payment is made. This can make HP a great solution for durable items you want to keep and which can give you long-term service.

Operating Leases

Operating Leases work like a rental agreement in that you pay a monthly rental charge to use the asset. There is no upfront cost - you simply pay as you go.

The responsibility of maintenance, repairs and registration can often lie with the leasing company.

Finance Leases

Finance Leases also let you borrow equipment for a set time, but maintenance, repairs and running costs will become your responsibility.

Finance Leases are common with larger assets such as factory plant installations. If you want to set up a production line, for example, a Finance Lease could provide the scale of funding you need.

We helped our client set up a Finance Lease, which would provide the canning line he needed. With no upfront cost, the equipment could be ordered and installed in under a week.

“I already had the kit in place which would allow me to take care of the preparation and mixing. Now, suddenly I could afford a canning line, which meant I had a complete production facility. I could up production and make a great deal more product a great deal faster. It’s put my business on a profitable footing.”

Our team includes Asset Finance experts who can help you find the right kind of finance arrangement, the lenders who work in your sector, and the most competitive deals.

If Asset Finance is essential to spread the cost of the equipment you need, our expertise could be key to get the Asset Finance that’s right for your business. To find out more about the solutions that Rangewell can help you find, call us now on 020 3318 2613.