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Finance available for the asking — despite the gloom
JN AND BRADSTREET reports eke gloomy reading these lys. That for the motor industry ivering the first six months of 182 was anything but icouraging. The period saw no ss than 735 company iuidations, 23 per cent up on e first six months of 1982. With 17 bankruptcies among irtnerships and individuals, it iok the motor trade into third ace in the "failure prone" tings behind retail trade asinesses and building and mstruction.
The figures do not dis
iguish between private car id commercial vehicle terests, but if they did I suspect )mmercial vehicle business ould be shown as the poor dation to the car side. The ridence of this is to be found in dividual reports of ankruptcies, like that of berdeen DAF dealer, Keith icol Motors (Aberdeen) Ltd., Id company annual reports. It's a real pointer to the tuation when a company like rlington Motors reports a loss and more important — the rst-ever in its history. To quote lairman N. C. N. Housden: This has been caused almost ntirely by our involvement in le commercial vehicle market." rlington has, of course, a Dread of interests including uck and bus bodybuilding and ar, truck and bus sales. The loss t Arlington was despite its policy of recent years of 'clueing the extent of our aliance on this market" which pparently mitigated the impact. That is the dealer business; )ad haulage is nearly as bad. he level of haulage companies oing out of business to date us year is nearly double that of ist year which was bad enough self. A total of 192 haulage ompanies went into liquidation the first three months of this ear.
So is there a bright side? If lere is, it's not easy to see at the lament. Ironically, if you want nance, "money is easy to get at le moment," according to one nance broker I spoke to acently.
Indeed, companies like idustrial and Commercial inance Corporation (ICFC) which traditionally has provided backing for small concerns long before the present Government decided small was beautiful, is positively looking for companies to back when the principals have a sound proposition to put forward.
ICFC is a subsidiary of Finance for Industry which is owned 15 per cent by the Bank of England and 85 per cent by the English and Scottish clearing banks.
From time to time it holds a "state of the market" conference and it was consoling to hear at the most recent of these that, in spite of the recession, road transport, truck dealing and commercial vehicle manufacture in its various forms are not regarded as any worse a risk than other businesses.
Many companies do not want huge sums of money to finance a particular idea and this is confirmed by ICFC who last year found that more than half of the investments agreed were for amounts of under £50,000. Admittedly, the number of company failures where ICFC was an interested party are up: 153 in 1981-82 compared with 114 in 1980-81. This was, however, due as much to a larger ICFC portfolio in helping fledgling companies as to the recession. The number of "start-up" companies which ICFC financed increased to 440 from 417 and it is interesting to see that it helped no less than 107 management buy-outs of companies.
Realistically, ICFC says that, for the present, "survival will continue to be the major consideration for the established small business" until the economy picks up and the company is standing in the wings with bags of gold waiting to rush out and hand it over to small businesses once this happens.
One of the most interesting things ICFC does is to list companies which it is financing — every name, incidentally, appears with that company's permission. It is a confidence boost in fact if it is known that a company has ICFC backing. There are 26 road passenger and road haulage firms listed including such names as Constantine Holdings Ltd, Longton Industrial Holdings Ltd., G. Priestner Ltd, Smith and Herbert Holdings Ltd and Taylor Barnard Ltd. — to name just a few of the better-known concerns.
On the finance front, Barclays Bank has also had things to say about its latest business finance facilities.
The restrictions on borrowing set out in the current Finance Bill have forced changes in a number of areas of business finance. It has meant, for example, that the Business Start Loan Scheme of Barclays has been re-launched.
Primarily intended to provide finance for new businesses, the Barclays' scheme is also available to established businesses proposing to launch new projects or products. The re-launched scheme has been extended to include partnerships and sole traders as well as limited companies.
Under the Barclays scheme, loans of £5,000 to £1,000 are available over three, four and five-year terms and no capital repayments are required until the end of the term.
Up to 100 per cent of total expenditure for fixed assets, research and developments costs and anticipated losses in the first two years can be obtained. Business assets only are required as security, not personal ones.
Interest payments to Barclays when this scheme is used are required to be made as a royalty linked to sales — "a fundamental difference from charges for other forms of bank finance," says Barclays.
However, the bank explains that the royalty charged will differ for each load, being calculated from sales projections supplied by the potential borrower. "It will be designed to provide a return to Barclays of 17 per cent on the principal sum at the mid-point of the loan."
In most cases, says Barclays, the scheme will result in relatively small payments in the early years, rising as the business becomes better established. The royalty will be tax deductible as normal interest payments.
by George Malcolm