Funding Business Growth Options available to businesses

Challenges Facing UK Business 29.6m people in employment in the UK 13.6m employed by SMEs 45% of employmentCombined revenues of £1.6tn Since 2008 the SME sector has suffered a lending decline of 40% UK economy is about SMEs

Scenario Finished GoodsGross margin of 35% A business has won a substantial new order and is examining the options available to it to finance the order Substantial businessesGood credit Manufactured outside the UK Established supplier Approximately 90 days The OrderThe Goods The End CustomerThe Trading Cycle

Traditional Sources Of Finance LoansMortgage SupplierCustomer Sell sharesShareholder investment Bank LendingShareholder Finance Negotiating Payment TermsInternally Generated Cash Reduce costRestructure Equity Finance

Traditional Sources Bank Lending Loans/Over draft Import/Export loans Invoice discounting When security is fully utilised, no additional lending will be available Typical Banking Products Banks Lend Against Security

Traditional Sources Internal Improve efficiency Reduce costsRefinancing unencumbered assets CostAvailabilityPermanenceRisk Release Cash In The Business Shareholders Loans

Traditional Sources External CostValuationControl issuesTiming Equity Finance Payment Terms - Supplier Extended payment termsProfit share Payment Terms - Customer Early payment discounts

True Trade Finance What is true trade finance Ability to fund the supply chain without taking on debt or selling equity The fundamental difference is that true trade finance is not lending; its trading A true trade financier takes genuine risk by buying goods against confirmed purchase orders

Scenario Revisited It was a true example 3 years oldSubstantial new orders Finished goods designed in the UK Manufactured in China Nearly doubling of revenue The BusinessThe Order The GoodsThe End Customers Major high street retailers Good credit The problem Bank unable to extend further financeSupplier demanding large deposit

The Trade Finance Solution

Key Differentiators Against confirmed purchase orders Typically use of letters of credit Trade financier enters into the supply chain Ability To Open Purchase CommitmentsEnd to End Supply Chain Finance Physically Trading Of GoodsTransactional Finance Pay when used

Goods That Have Been Funded by TFP Gas BBQs Pizza boxes Bluetooth keyboards Seasonal giftware Homeware Iron ore Used vegetable oil Baby clothing Commercial batteries Replacement windscreens Components for hydro- power stations High resolution surveillance cameras Garden games Recycling equipment Components for oil industry Woodchip/biomass

When It Goes Wrong We have to accept that things do go wrong Work with client to mitigate loss Marine and credit insurance We Take RiskInsurance CommunicationSecurity Through ownership of the goods Knowledge and ExperienceDue Diligence DebenturesWarranties

Conclusion All things to all people; there is no one size fits all It is essential to understand the limitations of solutions as it is to understand the benefits More than one product may be required to solve the funding challenge Business people must ensure they are aware of solutions available and how to use them