Your manufacturing business after coronavirus

The government's ruling that people who can go to work safely should do so is good news for your manufacturing business. You need a full workforce to run a manufacturing operation. Working from home is not an option if your workplace is a factory floor. 

Some factories have shut down with workers concerned about the risk to their health - but the prime minister has said people who cannot work from home, such as those in manufacturing, should be “actively encouraged” to go to work. 

It looks as though you can reopen your manufacturing operation if you had shut it down. But there is no point producing goods if you have no orders coming in. 

But things do not look positive for the sector just now. The coronavirus lockdown has sent manufacturing in the UK tumbling to the lowest level on record. The latest IHS Markit/Cips Composite Purchasing Managers’ Index (PMI) for the UK manufacturing sector, the key measure of economic performance in manufacturing and services, dropped to a survey-record low of 32.6. April. It needs a figure of 50 to indicate business as usual with a steady demand.

It is the lowest figure since the survey began more than two decades ago.

The customers are just not buying.

The activity levels seem to be due to a combination of business closures, shutdowns among clients or shrinking sales due to a slump in non-essential spending.

And some sectors are faring worse than others. April’s final PMI figures were released as the Society of Motor Manufacturers and Traders revealed the UK’s new car registrations declined by 97.3 per cent in April, the sharpest drop on record. Cars and vans are not moving off the forecourts as showrooms closed, faced with a dearth of buyers, who were staying locked down at home.

Other sectors may not be as badly affected, although there could be similar horror stories in the aerospace sector and in consumer electronics.

The problem could be prolonged. Even after the rest of the UK goes back to work, there could be a delay while people feel confident enough to start spending again.

The government is starting to look at easing the demands of lockdown, but because of this delay, two out of five manufacturers believe it will take between six to twelve months to return to normal trading conditions after the Covid-19 crisis ends, new research suggests. Industry group, Make UK, said previous levels of output will only return following the reopening of sectors such as automotive and retail and the resumption of consumer spending patterns - which is likely to take several months to achieve.

Your business will need to pay wages and suppliers while experiencing severe disruption to your cashflows because of the crisis.

What can you do?

It looks as though if your business is manufacturing you could be facing some lean months ahead. But there could be some solutions available which could help provide the funding you need.

In the present climate, you need to call on government support for your business. Depending on the size of your operation, you may be able to apply for various types of government-backed loans. The Coronavirus Business Interruption Loan Scheme - CBILS  - is aimed at helping small and medium-sized companies keep in business by allowing them to borrow up to £5m at preferential rates. If your business is larger, with an annual turnover of between £45 million and £500 million the Coronavirus Large Business Interruption Loan Scheme (CLBILS)  works in a similar way, but provides a government guarantee for loans of up to £25 million. Very large firms may be able to consider the Covid Corporate Financing Facility.

Whatever manufacturing your business does, get the support you need today to find the most appropriate and affordable funding for your needs

But what about after the lockdown is over, and your business is trying to get back to profitability? Trading conditions may be difficult. Your customers are just starting to look at reopening their own businesses after running stocks down at the beginning of the crisis. They may be able to look at placing orders for delivery in the future, but funding for those orders may be difficult for them to arrange. They may demand longer payment terms from you which will make your own financial position even worse. What’s more, conditions could remain challenging for some time. It has been estimated that it could take the UK economy three years to fully recover from the fallout of the Coronavirus pandemic.

The solution could be Invoice Finance.

What is Invoice Finance?

Invoice Financing provides an ongoing credit facility that ensures you get paid quickly even when customers are slow in settling what they owe. It can allow your cash flow to keep pace with your production, rather than lag behind it. Once you have produced and shipped an order, rather than having to wait weeks or months for your invoice to be paid, it lets you take up to 90% of the cash you are owed immediately. The remainder will be paid to you, minus fees, once the customer settles the outstanding balance.

Supporting your recovery

Invoice Finance can help power your business recovery. If you have to wait to get paid, a big order can actually be a problem – because you don’t have the cash to pay for the stock or staff you need.

With Invoice Finance, you know the money will be in your bank almost as soon as you issue an invoice. The more work you do, the more cash you will have to call on.

How does Invoice Finance work?

Invoice Finance provides ongoing cash advances based on the value of invoices you have issued, but have yet to be paid for.

1. You provide a service or product to your client and agree on payment terms, and follow up with an invoice.
2. You then notify your Invoice Finance lender, who will advance you up to 90% of the value of the invoice as a cash advance, usually within 24 hours of the notification.
3. Once your client pays the invoice, you receive the remaining value of the invoice. At this stage, the lender takes their fees.

The type of Invoice Funding you need

If your manufacturing business has a turnover of over £25,000 you may be interested in Factoring. This allows the lender to approach the client and collect the debt. This saves you time spent chasing payments and lets you have the support of an experienced credit control team to take care of every aspect of your debt collection.

Many providers offer the option of Bad Debt Protection as part of their service, which means even if your customer goes bankrupt or for other reasons fails to pay, you don’t lose out.

Invoice Discounting

If you already have a credit control facility and your turnover is £100,000 or more, Invoice Discounting might be more appropriate. Once you collect the debt from your client you return the advance to the lender. This can be disclosed or undisclosed - which means you can choose whether you tell your clients you are using Invoice Discounting or not.

There are many Invoice Finance providers, and the costs and charges they apply can vary.

What’s more, some providers specialise in certain business sectors. To get the Invoice Finance arrangement that’s right for your particular business, you need expert help.

At Rangewell, our team of business finance experts work with you to get to know your business and understand the kind of arrangement and features you need. They can help you find lenders who work in your sector and secure the most competitive deal, complete with any extra services – such as bad debt cover – that you need to get back to profitable manufacturing.

Just one of the solutions from Rangewell

Invoice Finance is just one of the solutions that you can call on. We can provide help with finding the most appropriate providers for funding your manufacturing business, meaning that we know and work with lenders who can provide the scale of funding you need for your production operation, whatever scale you may operate on, and understand the challenges your business faces. We can work with you to discuss options like bad debt protection and find the most competitive funding for your needs.

Whether we can help you find the answers to your needs with a loan under CBILS, or need more extensive answers such as Asset Refinance or even a remortgage to keep your business alive, our team is ready to help. 

We know all the lenders across the markets, and we can work with you to find the most cost-effective answers to your funding needs. We can help you find the cash you need to get back to work - and building a future for your business. To find out more, simply call us today.