Archive for April, 2013
Strong businesses will have a strong balance sheet and a solid business plan. They also need to devise a well thought out strategy for accessing capital.
In doing so, business owners have many points to consider, including whether it is better to ‘self-fund’ so that they are in control, who are the most supportive lenders, and whether or not to engage third party professional brokers.
In the new funding landscape, business is complex and so are the options for funding. It is important to make sure you cultivate several lender relationships so that you keep as many eggs in your basket as possible.
Non-traditional lenders are more willing to lend for larger periods than banks, or they may provide trade capital that doesn’t amortise upon maturity.
They demand higher rates of return, but in return have less rigid terms, and place more emphasis on cashflow and future payments.
Here are some other types of lenders to consider:
– Asset based lenders look at the capital locked in your business
– Finance companies go beyond the senior debt
– Mezzanine Funds – usually the investor will want some involvement in the business
– Private equity is used to fund an acquisition or new technologies for the longer term
– Vendor and Customer funding when there are synergies between the two.
– Crowd Funding – obtaining capital from a disparate group of small lenders.
Generating enough profit and having sufficient working capital to fund growth is a real battle for today’s SME’s. 53% of them feel the current business environment is riskier than this time last year, and 13% have considered closing their business in the last year, according to a quarterly SME Risk Index from Zurich.
It’s best to anticipate your funding needs early and to make sure that your business succeeds, you can use the 5 C’s of credit – a method used by lenders to determine the credit worthiness of potential borrowers:
– Current capital structure – what is the level of current debt?
– Cash flow for the past few years and next few years, based on reasonable assumptions
– Collateral in the business
– Conditions of the industry and business environment
– Character of the borrower – they will look at management strength, customer base and supplier base.
In this economic climate businesses are at great risk of underperformance. Lenders who believe in the management will back a request. However, lender fatigue can set in if they lose confidence, and they will do for any of the reasons mentioned below:
– Late filing of accounts
– Late management accounts
– Lack of meaningful information
– Poor stock and ledger control
– Under capitalized
– No headroom in the facility
– Industry in decline
– Lifestyle business which can no longer afford to finance lifestyles
– Lack of communication.
The best time to access capital is when you don’t need it – So think ahead!
UK businesses are increasingly trusting their staff and empowering them by allowing them to work anywhere, meaning that work is no longer a place we go to, but an activity we do. The office in the future will be a place for occasional use.
35% of people surveyed said they were more productive at home, and when you consider that employees spend on average 200 hours a year travelling to and from work, this could be an extra five weeks’ productivity for a business.
Not only would this make an employee happier and more engaged because they haven’t been sat in traffic, this also alleviates the need for extra staff.
With employees preferring to commute just 20 minutes from home, remote working doesn’t just mean sitting at home, it could be at a customer or supplier site. With video conferencing being widely and easily available now, businesses can cut business travel and give an employee a better work/life balance.
There are a number of measures that companies can put into place to make sure that anywhere working works for them:
– Have a culture that measures output rather than process.
– Remote employees must spend time, the occasional day, in the office to build rapport and interaction.
– Have regular check in appointments as even the best phones don’t pick up body language and you may not notice if an employee is disgruntled or has an issue.
– Have a best practice programme. This must be formal and explicit and not on an adhoc basis.
– Go paperless – make sure technologies are portable, and advise times when you are available to communicate.
– Use technologies to make individual and team performance transparent
– Have back up laptops that can be deployed, so that no one can say ‘my laptop is playing up and so I can’t work’
– Core competencies – individual must be adaptable, well organized and flexible
– Start frequent communications with purpose to help remote employees feel connected and included
– Explore whether there is a need for internal social networks in your business
– Make sure that you ensure that remote employees get the same promotion opportunities as those who are office based.
But a lot of businesses remain skeptical about remote working. 71% have not adopted home-working, citing the employees fear of isolation and the need to be seen in the office as the main reason for low take up.
Business remains a human enterprise. For an owner of an SME, seeing operations up close and in person are critical to success.
However,companies that are categorically saying that they are not willing to embrace anywhere working are going to miss out on a level of employee-led innovation that will be debilitating in the long term.