No-one need S reminding that 2010 is going to be
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another difficult year, and that money is going to be scarce. However, on the old "day follows night" principle, a recovery must, inevitably, come.
As a result, this leaves small and mediumsized hauliers with two issues to chew over first, how to find cash to shelter from the chill wind of recession: and second, how to prepare financially for expansion as recovery arrives.
While City bonuses seem largely unaffected by financial meltdown, and stock markets are rallying, the Confederation of British Industry has already warned that capital markets are -unlikely to provide significant funds for small and medium-sized companies, which remain reliant on bank lending for their funding':
This means many hauliers will need their banks onside and, on the face of it, borrowing money from this source would appear to be a relatively straightforward exercise, despite the current climate.
For one thing, over the past 12 months, the government has pumped L37bn of taxpayers' money into Lloyds TSB and the Royal Bank of Scotland (RBS). Meanwhile, the Bank of England has cut interest rates to all-time lows and injected £125bn into the economy through quantitative easing.
Yet an average interest rate for loans and overdrafts of 6.5% is well above the Bank of England's base rate, and access to finance remains a huge bugbear for many small to medium-sized operators.
John Wright, national chairman at the Federation of Small Businesses (FSB), tells CM: -Despite government bailouts and interest rates set at a record low, small firms are still finding it tough to access affordable loans and overdrafts from banks."
Dragging their heels His assessment is backed up by the Forum of Private Business (FPB), which found that just 4% of its members said access to working capital had improved during 2009and a whopping 58% of those surveyed felt it had actually worsened.
More than two-thirds (68%) said the cost of borrowing had increased. while 65% said it was now more difficult to get funding for growth. Over one-third of small business owners (36%) wanted lending to be made cheaper and 27% said more flexibility in negotiating terms and conditions as business needs changed would be welcome.
"Our members are telling us that banks are dragging their heels and driving up prices when it comes to lending to small businesses," says FPB policy representative Matt Goodman. And the organisation is concerned that this situation could deteriorate it recently urged the European Commission not to ask banks to abandon more than two million of their business borrowers. The EC is thought to be considering making Lloyds TSB and RBS shed 10% of their small customers to avoid contravening its state aid rules.
So, against this backdrop, what options do operators have for refinancing their businesses perhaps just to keep themselves afloat in the least risky manner?
1Ensure you have a good relationship with your bank. Bankers have not had the best press over the past couple of years, in some cases for good reason and yes, as already discussed, evidence suggests that small firms are having difficulty in accessing finance. But banks still remain the most obvious port of call for any haulier looking for extra funding.
2Make the most of the credit lines you have. "Ensure your bank relationship is strong," advises Elliot Lcnnick, CEO of MAN Finance for northern, eastern and western Europe. "And make sure you are using the facilities available. If you have an overdraft limit, use it for day-to-day business, but not for purchases of new assets." 3Do you really need to borrow anything at a./ all? What about selling assets to raise money? Property or vehicles are perhaps the most obvious candidates here. "Sale and leaseback is a great way of freeing up capital," says a spokesman for the British Vehicle Rental and Leasing Association. "You sell your fleet to a leasing company and then rent it back. It gives you a capital injection, but still fixes your fleet costs." Thus, money that would have been spent buying vehicles can go on servicing debt or [making] investments elsewhere. 4Investigate bank loans with government backing. The daddy of these is the Enterprise Finance Guarantee (EFG), a E1.2bn pot of money for small firms that the FSB was calling for. It is a loan guarantee backed to the tune of 75% by the government, it is aimed at getting additional bank lending for small businesses. Eligible companies are able to borrow between £1,000 and £1 m, money that could be used to pay off an existing business overdraft, freeing up working capital by leaving that facility in place. So far, around 6,000 loans have been Riven out, and
the government has extended the scheme for an extra year, putting in another f500m.
5Have a look at other government schemes. The Department for Business, Innovation and Skills, which is responsible for small business and enterprise policy, backs what it calls Finance for Business.This is a range of funds for businesses with viable plans that have been unable to get support from commercial banks and investors.These tend to be available to companies with fewer than 250 employees. One good example is the Small Loans for
Business programme, offering up to £50,000 to help owners start up, develop and expand.
L There's never been a better time to go
green.There's no reason why hauliers can't look at what's involved in loans and grants based around helping businesses become more resource-efficient, reducing costs along with their carbon footprint, and increasing competitiveness.
7Where you are could make a difference. Some lending is dependent on geography. For example, the government's Grants For Business Investment are aimed at helping small firms in disadvantaged areas increase productivity, skills and employment.
8An employee share scheme could be a means of getting money into your business. Allowing staff to buy shares in your
Of course, there are caveats with most of these ideas. Even though the schemes on offer from the Department of Business. Innovation and Skills look attractive, FSB national chairman John Wright warns: "Much of the support from the government is only available through the banks and often this isn't replicated at branch level." When it comes to the EFG, for example, lending decisions are the responsibility of the lenders rather than the government.
As a result, the ESB would like to see more alternative sources of finance provided locally such as through regional development agencies, local councils or even post offices.
This would increase the choice of finance on offer to business owners, thereby enhancing their prospects of survival and helping them play their part in stimulating the economy and getting the UK out of recession and onto a steady recovery," concludes Wright.
company, perhaps supplementing them with free ones, might be viable. It is possible to use such schemes to conserve cash and reduce the cost of pay and bonuses. There are a number of legal considerations to take into account, but you may be able to tailor something that works for both you and your employees. For an overview of the options, go to www.businesslink.gov.uk
9Think about joining a credit union. These are financial co-operatives offering better value loans to their members than banks are likely to be able to. They are also increasing in popularity, according to the Association of British Credit Unions (www.abcul.coop).
lin Above all, keep talking. Even if things U are slipping down the pan, you must let your main funders know what's going on. It's possible that there may be ways to aggregate debts so that they can be repaid over a longer period, for instance. But without maintaining a dialogue, however difficult that may be, things are likely to simply get worse.
Of course, there is much talk of economic recovery — albeit cautious — and future growth, but in these recessionary times that can all seem a very long way off.
That said, though, there are still a few options for funding open to even the smallest operators. It's not all gloom out there. 0