During the coronavirus pandemic you may have been tempted to use finance to increase your equipment portfolio, in turn increasing your turnover, but were perhaps put off by all of the jargon. In a Q&A with P&P editor, Melanie Attlesey, Rob Greenhalgh, relationship manager at PMD Business Finance, breaks down the technical lingo and explains how you can capitalise in 2021.
Q. Can you provide an overview of who you are and what services you provide?
A. PMD Business Finance was established in 2010 and is now one of the largest independent providers of business finance, lending over £125 million to UK SMEs. We specialise in working with suppliers and manufacturers to deliver point of sale finance solutions along with asset finance, invoice finance, structured finance and unsecured loans.
Q. Why should a garment decorator consider using finance?
A. Using finance is a great way of being able to grow your business through investment in the latest garment technology while preserving cash flow. Even during the current pandemic, some businesses want to keep pushing and investing in the latest technology to improve output and diversify their current offering. Spreading their investment over the equipment’s working life ensures vital cash reserves are retained in the business.
Q. What aspects of a garment decorator’s business is taken into consideration during the lending process?
A. The funder will consider time trading, current performance and affordability alongside how the equipment will generate income for them so will want to understand and be given evidence that your business can demonstrate a return on investment (ROI).
Q. Can a new start business access finance?
A. We have access to over 100 funders, many of whom are willing to support new start businesses. The criteria is a little stricter but as long as there is sufficient fall back in the people behind the business and they evidence a clear business case then the process is relatively straight forward.
Q. What advantages does financing machinery and equipment have over paying for such items using cash?
A. Financing, as opposed to outright purchase, allows your business to use the equipment to make a profit as it works for you. You wouldn’t pay your employee five years in advance, so why do the same with your equipment? This also allows accurate budgeting and forecasts to stay in complete control with their fixed monthly payments.
Q. Are there any downsides that people should take into consideration before buying machinery and equipment on finance?
A. We always recommend that businesses speak to their accountant before going ahead with any finance agreement. With the team that we have at PMD, we aim to make the process simple, transparent and hassle free.
Q. Would you say accessing finance is a good way to grow and expand business?
A. It all depends on the business, but finance can help you invest with low initial outlay to provide a new service, speed up an existing one or buy another business to complement your existing one.
Q. What should a garment decorator do if they are struggling to meet their repayments?
A. Communication is key. Always speak to your lender and they will work with you to structure a repayment plan and support you in navigating through a difficult time.
Q. Have you seen an increase in machinery and equipment being purchased using finance during the coronavirus pandemic?
A. Yes, with the government providing funding and grants to keep businesses going we are seeing that this has prompted many companies to keep their hard-earned cash in the bank should the worst happen again. A lot of my customers have seen a big increase in online orders due to people working from home and so they invested heavily in faster machines to cope with demand.
Q. What do you predict the world of finance will look like in 2021? Will more businesses look to finance as a way of recovery in a post-coronavirus pandemic world?
A. We see finance as being a main driving force, not only in this sector but for all sectors. Suppliers need to make it easier for their customers to find a funding solution. Businesses find it easier to justify their investment when they evidence ROI.
Common terms in finance
Here Rob Greenhalgh, relationship manager at PMD Business Finance, provides an overview of some common terms that you may have heard when it comes to finance.
Asset finance is a type of lending that will give you access to equipment, machinery and vehicles (business assets). This is predominantly done through a funder who will release the funds to the supplier of the asset. Many business assets can be financed, which allows them to preserve cash flow and spread the investment over a length of time as the assets work for them. Using a broker such as PMD can give you access to flexible repayment options such as low start and deferred payment schemes.
Asset refinance allows you to access a cash lump sum using the equity value of assets already on your balance sheet. It is a secured loan, repaid monthly, that can extend as far as five years, plus interest.
Coronavirus Business Interruption Loan Scheme (CBILS)
CBILS provides financial support to smaller businesses (SMEs) across the UK that are losing revenue, and seeing their cash flow disrupted, as a result of the COVID-19 outbreak. The scheme is a part of a wider package of government support for UK businesses and employees.
In the eyes of most lenders an established company is one that has filed more than two sets of yearly accounts, and that has established accounting and control systems. They may have passed through a period of rapid growth and are now consolidating their position.
Finance lease is a popular agreement for businesses needing equipment, cars, vans and commercial vehicles. It offers flexibility to eligible companies who want to invest in the latest technology without having to find a deposit. Throughout the agreement, the vehicle remains the property of the leasing company.
Hire purchase (HP)
HP is available to companies who wish to invest in assets and have this show on their books from the start, with payments spread over a period of time. A full VAT deposit will be paid, part exchange offered, or both, and the higher the initial deposit given, the lower the monthly payments will be. At the end of the agreement, you will legally own the asset after paying an ‘option to purchase’ fee. With this finance offering there is also an option to defer the VAT for up to three months, which can help ease cash flow restraints.
New start business
Funders classify a new start business as anyone who has been trading for under two to three years and those who do not have a record of at least two sets of yearly accounts.