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Case Study: Rapid growth and the financial challenges it brings

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After a previously slow year, this put tremendous pressure on our client’s cash-flow. Added to this, approximately 50% of their sales were overseas, with a significant portion in the Middle East which their current funder was reluctant to support. Subsequently cash was tight and facilities had been taken out on a ‘piecemeal’ basis.

Finance was required for a performance bond, the materials and increased labour on all the additional work whilst at the same time maintaining all the ongoing costs involved. As a result of the previous year’s slower trading, the business owners had accrued various liabilities making the situation a little more challenging.

This is a successful business with a full order book, forecasting good profits, but faced the all too common problem of insufficient funds to trade to their maximum potential.

We were tasked with raising immediate finance to cover the performance bond, which was made available 3 days after being requested.

[/cs_text][cs_element_gap _id=”9″ ][/cs_element_column][cs_element_column _id=”10″ ][x_image type=”none” src=”https://www.thebusinessboard.co.uk/wp-content/uploads/2019/11/success-2081168_1280.jpg” alt=”” link=”false” href=”#” title=”” target=”” info=”none” info_place=”top” info_trigger=”hover” info_content=””][/cs_element_column][/cs_element_row][cs_element_row _id=”12″ ][cs_element_column _id=”13″ ][cs_element_headline _id=”14″ ][x_gap size=”30px”][cs_text]By switching to a lender with a presence in the Middle East, who were comfortable with the proposal, an additional circa 25% of funds were made available and injected into cash-flow. The cash level was supported by sensible commercial views on concentration levels, prepayments and purchase order finance.

Once the funding was sustained we introduced the company to our government export contacts, with a view to them underwriting the performance bond and re-introducing the balance into cash-flow. On compiling and presenting the information, there were some clear ‘quick wins’ where additional finance at more favourable rates could be obtained. We suggested these could, and indeed should, have been extended to the client.

Additional finance could clearly be obtained through existing facilities. We suggested that our client approached these lenders as this was his most cost effective method of finance.
We suggested it as a possibility as we could clearly see the benefit to the client, and always look at the bigger picture and a long term relationship, in some cases despite not receiving remuneration for such advice.

When the client was subsequently turned down for reasons based on unaffordability, we swiftly sourced alternative finance.

With the business now trading positively, at this point we then introduced one of the accountants we work with regularly. Coincidentally, he was actually the Finance Director of a business we had sold the previous year; a very commercial accountant who would always put himself in the ‘owners shoes’ and fix the easy wins that often aren’t apparent to the business owner. He also introduced a debt reduction strategy on the longer term liability and cash generative practises.

One of our Finance Director’s favourite adages is; ‘you don’t know, what you don’t know’ and often you can’t see the bigger picture when you’re so close to the coal-face.

Having helped businesses time and time again they instinctively know the best approach.

If you would like an informal, confidential, honest, independent and unbiased discussion, please do not hesitate to email us at: info@thebusinessboard.co.uk or call our office on 0118 338 1818.
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0118 338 1818

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