Message from Chris Dines, CEO of Informed Funding

 

We have been tirelessly working on creating a new look to our website so it is even easier to navigate and provides easier access to the fantastic tools to help you hone in on the most suited funders based on your needs. I am delighted to say, we are now very nearing the ‘go live’ of this new look and structure! We have simplified the homepage so you can easily navigate the five simple steps to find the funding options you need.

 

The first step, if you haven’t already, is to register, which for a limited time only is absolutely FREE! This will give you full access to all the funder microsites and tools you need to help you identify your funding options.

 

We have then created a tool ‘What’s your funding challenge?’ which helps you filter the types of funding options based on your circumstances – for example, are you a new start up, or do you want to expand your business, or do you simply need an injection of cash to cover your current commitments? Depending on your circumstance our new tool will then direct you to funding options that best suit your situation, and some of the providers that provide that type of finance (such as P2P, Cash Advances etc.)

 

Which brings us to step 3, browsing the funders microsites (we have over 80 – more than double any other platform!)

 

Step 4 is then utilising our other tools to see if you are ‘funding ready’. These tools enable you to self-screen through diagnostic tools, dramatically increasing readiness to apply for funding.

 

When you know you are ready, you complete Step 5 – contact the funders directly via their microsites to get the application process rolling!

 

We hope you like the new look and navigation as much as we do. Please do have a look once live within the next week and tell us what you think!

 

Regards

Chris

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For anyone involved in receivables finance, last week’s trading update from Tungsten offered some interesting snippets to consider and as an early-stage equity investor in the invoice trading and supply chain finance provider Platform Black, I count myself among those who have a particular reason to monitor developments in this market.

 

Tungsten is a fascinating company that has been assembled by a series of acquisitions. At its core is Tungsten Network, an electronic invoicing system that links large companies and their suppliers in countries round the world. Alongside this sits Tungsten Bank, a specialist UK lender that advances short-term funding to these suppliers against e-invoices that have been approved for payment by large corporate customers that use Tungsten Network. In a nutshell it’s classic supply chain finance: once the large corporate buyer has approved the invoice and undertaken to pay on a fixed date the smaller supplier can secure immediate funding against that approved invoice, thereby improving its cash flow and working capital position. The trick is that the supplier will tend to be able to access cheaper funding this way because the finance provider will base its risk assessment on the credit rating of the large corporate buyer, rather than the smaller company supplying it.

 

The bonus for observers such as me is that Tungsten is quoted on ’s Aim market and so has to publish trading and financial information regularly, which helps to shine some light into a market dominated by private companies and divisions embedded within larger groups.

 

What particularly caught my eye last week was some early figures on how Tungsten’ supply chain finance operation is doing. Tungsten Early Payment is still in its infancy, having launched only at the end of last year. By April 30, 188 suppliers who send electronic invoices via Tungsten Network had signed up to use TEP but only 38 were live due to what Tungsten founder Edward Truell calls “excessively onerous processes and excessive delays between signing the contract and being allowed to press the famous button to get the money”. These processes are now being streamlined to remove a mandatory three-month grace period between signing up and financing your first invoice. “We’ve imposed on ourselves some excessively conservative policies,” admits Truell.

 

So far, TEP says it has funded invoices from these 38 users worth a total of £32m and that the rate of usage is encouraging – they finance 79% of the value of their available invoices on average. Larger companies that use the service pay about 4.5% annualised on average, while SMEs pay 12.4%, or about 1% a month.

 

This all sounds promising. But to my eye there were two important caveats in the Tungsten figures that I suspect will ring true to many in this part of the alternative finance market. The first is that Tungsten has found marketing TEP to suppliers and on-boarding them harder and slower than anticipated – its conversion rate so far among suppliers targeted to sign up to TEP was 6.6%.

 

“The sales and enrolment processes take longer than desirable; require more sales people and marketing resources; and need a simpler supplier financing approval process to gain traction,” the company says. “We have hired Early Payment sales people, plan to increase the marketing budget in the current financial year, and are simplifying and shortening the process for suppliers to be approved for Tungsten Early Payment.” So even when your borrower origination comes via an e-invoicing network, which in theory should make attracting customers more straightforward, it still involves plenty of time, effort and money.

 

Second, it is clear that “cash drag” in receivables finance is a challenge for everyone. This term refers to the quantity of money that is available at any moment to finance invoices but remains unused. If investors are not able to advance all the cash they have committed, the lack of return on the unused portion will dilute their overall yield, sometimes in a big way. This is clearly an issue for Tungsten. The trading update reveals that Tungsten Bank has recently decided not to start accepting deposits as had been the plan. Tungsten already has access to all the cash it needs to finance invoices, thanks in part to a funding commitment from Insight Investment Management, an asset manager owned by The Bank of New York Mellon. Adding bank deposits at this point would risk driving down net returns.

 

It all goes to show that even for Tungsten, scaling its origination remains the most pressing challenge. There is no shortage of cash available to lend.

 

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If your aim is to grow your business have you considered the following questions?

 

How do I incentivise my staff so that they can benefit from the future growth of the business that they have contributed to? How can I reduce my company’s tax rates to 10% on earnings from the amazing ideas we have created? How does my business gain access to instant cash refunds from HMRC or tax deductions of up to 225% of our R&D spend?

 

Buzzacott’s latest resource ‘Innovative financial advice to help you grow’ looks at these and more. from more information.

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We’ve all heard the endless stories regarding cash-strapped businesses being rejected by banks. In fact, some 250,000 businesses are rejected each year. However we know that “banks”, and there are an increasing number of them, remain by far the biggest suppliers of SME finance. Not only that, but the pressures of recent years means they have been working hard to change and better engage with their target market: anyone attending our Funding Fair on 26 February this year, would have learnt that.

 

At this event we take a fresh look at working with banks – how to find the right bank, how to go about your approach, and how to get your pitch in the best shape to get the best deal.

 

This is a great opportunity to learn:

 

•          How to get your application into the shape that a bank expects

•          How banks go about assessing whether you are credit worthy – what are the deal breakers?

•          How you can go about improving your credit rating

•          The importance of “shopping around” – many banks have specialist products, focused on particular sectors, scale and business objectives

 

We are doing something unique at this event, in that we will have a panel of senior bankers (from competing banks) who will happily answer direct questions on the processes and standards they use to assess whether they can lend to a business. In addition we will be running case studies with growing businesses that have only recently obtained the right type of finance for their needs via banks. There will also be a presentation covering the range of banks that are now appearing on the market.

 

During the course of the seminar, we will also be running one to one workshops where you will receive independent assessment of your business plan and strategy – these are always very popular, and we have limited slots. Book early!

 

Date: 25th June 2015, 6pm – 8:30pm

Venue: 154 -160 Fleet Street, , EC4A 2DQ

Cost: The Event is Free to Registered Business Members of Informed Funding. £75 (including VAT) to others. Tickets are limited

To REGISTER please .

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Knowledge Peers' Charity Leaders Exchange are hosting an extended seminar related to Charities and Debt – “Should charities be borrowing to increase impact?”  

 

The Charity Leaders’ Exchange (CLE) is an experience-sharing network for forward-thinking Charity Leaders helping to drive positive change. The CLE provides intelligently selected guidance to help inform the decision-making of its members. Structured around topics that will challenge them to think differently, it facilitates connections between like-minded senior charity leaders and provides easy-to-access insights into their experiences.

 

The Charity Leaders’ Exchange is developing research into attitudes towards, and adoption of, different forms of funding, in particular social finance and debt.

 

The CLE's next event is an extended seminar and research related to Charities and Debt – “Should charities be borrowing to increase their impact?” As part of this project they are running a survey of charity leaders.

 

The seminar will run from 4pm - 7pm on the 21st May at Workspace, Fleet Street, 154 - 160 Fleet Street , EC4A 2DQ 

 

 The informative seminar will consist of:

• Listen to case studies from charities that have taken on debt to increase impact

• There will be a presentation of preliminary results from the survey (and see below)

• There will be a short presentation from Andy Davis, our own AFN Programme Editor covering some of the new forms of Alternative Debt Finance that are appearing in the market

 

The Survey includes:

• Knowledge and, experience of, different forms of debt finance

• Mix of current funding

• Attitudes towards different types of debt finance

• Perceived and actual barriers towards using debt

• Use of reserves to lend to others

 

Initial results will be presented at the event on 21st May. A full report will be produced from this which will be available in mid-June.

 

How to Register:  Full members of the Alternative Funding Network can access this seminar free of charge, spaces are limited. Please contact [email protected] to express your interest in attending.

 

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Following the success of our Funding Fair Launch at the end of February, we will be hosting another Funding Fair on the 24th September at the Metal Box on Southbank. We once again plan to have a full afternoon and evening of informative presentations, panel discussions and interviews with businesses that have benefitted from funding. At our event in February just some of the sessions included hearing from leading Alternative Funders who explored how alternative funding platforms deliver funding solutions to businesses based upon their stage of growth and development; Alpesh Paleja, Head of Economic Analysis at CBI (Confederation of British Industry) spoke on the economic outlook impact on businesses; we also witnessed a healthy debate from our panel of Directors from leading banks including NatWest and Barclays and “Challenger” Metro Bank.

 

This September, we are planning an even bigger event with more quality sessions! There will also be an opportunity to speak directly to funders and advisors at their trade stands and also attend FREE business advice clinics with top professionals from Buzzacott and Advantage Business Partnership.

 

More details to follow over the coming months!

 

To book your place at the Funding Fair and to express an interest in the drop in advice clinics, please register . If you are interested in sponsoring the event, or booking trade stand space, please email [email protected].

 

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There is a vast array of different types of funding options for businesses. In this newsletter we provide an overview on a further three funding methods firstly, with a deeper look into Cash Advances

 

What is a Business Cash Advance?

A business cash advance is a source of unsecured funding for businesses that accept payments from their customers via cards. However unlike a conventional loan that has fixed repayments on specific dates, the repayments for a business cash advance are made by deducting a fixed percentage of your card sales each day. This means that the repayments are always linked to your revenues, increasing and decreasing in line with your daily income from card payments.

 

What are the advantages of this type of loan?

The three main attractions of business cash advances are that they are flexible, come at a fixed cost and do not require you to provide any security. First, because repayments are linked to your card revenues, you will repay more when your business’s income is high and less if it falls, which helps to minimise the pressure on your cash flow. This also means that there is no fixed date by which the advance must be cleared: the rate at which you pay it off will depend entirely on how your revenues perform. Second, the cost of the advance is a fixed at the start and this does not increase if you take longer than expected to repay. Third, business cash advances are unsecured so you are not required to put business or personal assets at risk. This type of lending may be attractive to businesses that can’t obtain loans because they have bad credit ratings or little collateral available. However this type of lending will typically be significantly more expensive than a loan due to its unsecured and flexible nature.

 

What sorts of business can apply?

Business cash advances are available to limited companies, partnerships and sole traders that take payments via a credit or debit card terminal. Repayments are recovered directly from the business’s card takings by the merchant services company that provides the terminal, with the percentage owing to the finance provider automatically deducted before you receive the balance of the money. While available to any business that accepts cards, this type of finance is particularly popular with pubs, restaurants, hotels and retailers. Any cash or cheque revenues are excluded from the agreement.

 

How much can businesses raise?

You can usually borrow the equivalent of one month’s typical card takings, which in practice can range from a few thousand pounds up to several hundred thousand. This is normally repaid over a period of between six and nine months, although you can agree to repay more rapidly if your business’s pattern of income makes that feasible.

 

What does it cost?

The total cost of borrowing via a business cash advance is not usually expressed as an annual percentage rate. Instead, providers tend to quote a price to advance a certain sum of money which usually comes out at about £3000 for every £10,000 you receive. Therefore, if you obtain an advance of £10,000 you will ultimately pay back about £13,000 regardless of how long it takes you to do so.

 

How long does it take to arrange?

Because this form of finance unsecured, it can be arranged relatively quickly – usually within a day or two. You will have to provide evidence of your revenues from card payments over several months so that the finance house can work out how much funding you will be able to obtain.

 

Need to know:

• Because a business cash advance will be repaid as a set percentage of your daily income from card payments, the repayments will reduce your profit margin on every sale. It is therefore important to know what your margins are so that you can be sure the repayments won’t cause you any problems.

 

• This is a fixed-price loan and you cannot therefore reduce the total you owe by repaying it early.

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Early Stage and Development Loans

Companies that are relatively young but are trading profitably and do not have sufficient assets to secure a conventional loan may be able to raise development funding from a range of potential lenders. As these loans may be unsecured, they will tend to command higher rates of interest than standard, secured loans since they are riskier for the lender.

 

 

 

Invoice Factoring

Factoring and Invoice Discounting both enable businesses to receive cash advances based on the value of their outstanding invoices to business customers. Funds are usually advanced for periods of 30-90 days and providers will normally insist on financing all the invoices a company issues, meaning that the quantity of borrowing available will tend to increase as the borrower's revenues grow. In the case of Factoring, the finance provider will undertake credit control and collections on behalf of the borrower, while in Invoice Discounting, these functions remain with the borrower. 

 

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