Embrace alternative finance

Posted on 15 Feb 2013 by The Manufacturer

With £5m channeled to manufacturing SMEs in 12 months, from just one company, there must be something in alternative finance. Anil Stocker, co-founder of MarketInvoice, says opportunities are being missed through lack of understanding and awareness.

Anil Stocker, founder, MarketInvoice

After nearly five years of economic strife, the manufacturing industry is under huge pressure in the UK, facing threats from abroad and pressure to spend on updating processes.

But, as traditional banks are reluctant to extend overdrafts or approve loans, it is increasingly difficult for small companies to obtain the capital and finance to maintain continued growth, even in an atmosphere of renewed confidence in the sector.

After all, manufacturing companies face a very specific set of financial obstacles. They are almost always caught between the payment demands of suppliers, and the lengthy payment terms of customers.

Payment terms from suppliers have been falling as low as 14 days, whilst terms from customers are rising to as many as 120 days, leaving businesses short of working capital for months. The situation is unsustainable, but also avoidable.

A solution has emerged in the form of a number of nimble financial start-ups which are making up the shortfall by delivering business funding via the internet. It is time for the manufacturing industry to embrace alternative finance.

Alternative finance provides all kinds of ways to access funds, control cash flow and better manage costs, whether in the form of long-term loans, equity investment or next-generation invoice finance.

Time and time again, I see SMEs overcoming financial bottlenecks through alternative finance. The typical benefits are flexibility, cost, and speed of funding. It should become integral to all financial strategies for manufacturers.

While one in twenty of our customers is a manufacturer, most manufacturers are still unaware of the new solutions for accessing working capital.

In the past 12 months, my company, MarketInvoice, has channeled over £5 million to SMEs in the manufacturing sector, and the figure for 2013 will be significantly higher.

Our platform allows firms to raise funds against selected invoices whenever they need to, with no long-term contracts or obligations to use the service, and cash arriving hours after a request is submitted.

Let me give an example.

One of the companies using our platform is Predator Equipment, a firm that manufactures and distributes trailers. Run by Eamon McVeigh in Northern Ireland, it was nearly crippled by the financial meltdown, losing nearly all of their orders and unable to extend their overdraft or get a loan.

Even when Eamon found new customers abroad, he didn’t have the capital to meet the orders. The banks wouldn’t allow him to raise finance against invoices for foreign customers, leaving him at a dead end. MarketInvoice helped Eamon when he most needed additional capital, giving him access to the necessary cash to meet his orders and get his business growing.

Since then Predator has gone from strength to strength, taking on a number of new clients overseas, and significantly expanding its output.

What I would urge manufacturing business owners to understand is that banks are not the only option for finance anymore. Alternative finance offers real solutions to real problems, often in a much faster, and more flexible way.

The sooner UK manufacturers recognize the opportunities that businesses like MarketInvoice offer them, the sooner they can help boost UK productivity and help us out of recession.