Recent findings from the manufacturers’ organisation Make UK have shown that over three-quarters of manufacturing businesses have seen a reduction in sales and a downturn in output as staff are put on furlough.

The findings, published at the start of the month, cast a gloomy picture for the state of manufacturing following the COVID-19 outbreak, and following an OBR forecast of a 55% fall in manufacturing output in the second quarter, Make UK warns that this is likely to be an underestimate.

With manufacturers set to have a storm to weather over the coming months, having the right funding in place to allow your business to stay afloat during this time will be vitally important. We have put together this guide to help your manufacturing business find the right funding options, so you can navigate the ramifications of COVID-19 efficiently.

• Utilise government support
• Increase funding access by keeping tabs on your financial info
• Seek commercial loans
• Plan your finance effectively
• Get guidance tailored to your business

Download our whitepaper on how to overcome cash flow problems in your business

Utilise government support

In the face of the coronavirus pandemic, the government has offered a range of financial support initiatives to help businesses survive the obstacles brought by the UK lockdown.

One of these initiatives is the Coronavirus Job Retention Scheme, which has allowed businesses to place their staff on furlough, with 80% of their wages being paid by the government. This means business can retain their staff without having to pay their full wages during interruptions faced during the lockdown period – so long as employees do not work during their time on furlough. Many manufacturers are already using this scheme, with one in five companies furloughing their staff, but the scheme has been extended to at least the end of June, so there is still time to utilise it if you aren’t already doing so. Remember that during this period staff may only carry out training that you set them or volunteer for another organisation.

The Coronavirus Business Interruption Loan Scheme is another government-backed form of financial support, allowing small to medium-sized businesses to access lending of up to £5 million to help them through the COVID-19 pandemic. If you are facing issues with cash flow, it is worth applying for the CBILS. However, many applicants have reporting problems in accessing the loan, so make sure you know what information to provide and how to help ensure success. With the advent of the Bounce Back Loan Scheme, some CBILS lenders are now only taking applications for amounts of £50,001 and above.

Finally, the government’s most recent initiative is the Bounce Back Loan Scheme, designed to help small and medium-sized businesses to borrow between £2,000 and £50,000. The loan will be guaranteed by the government, with no repayments or interest for the first year and loan terms can be up to six years. Again, this is a route well worth considering if your business needs financial support to survive the effects of an economic downturn.

Increase funding access by keeping tabs on your financial information

When it comes to seeking funding for your business, knowing what information different lenders are looking for is key to making sure you are successful in getting the finance you need. The best way to do this is to make sure you are aware of your financial information so that you are able to provide this to lenders.

Standard information that lenders may ask for include:

• Details about your credit score and history – the better this is, the more likely you are to be accepted for funding
• Any assets with substantial equity your business may own – this may be handy for options like invoice finance, business mortgages and trade finance
• Information on your accounts – make sure to keep these up to date to give a true representation
• Cash flow projections and your overall business plan
• Other documentation – include tax returns, profits and losses information and bank statement

By making sure you have all this information available and up to date, you will ready to pass this onto any lenders you apply for as required – and will have a better understanding of your own financial situation too.

Seek commercial loans

Funding is available via many routes, with commercial loans now coming in many different forms, ranging from traditional business loans to alternate solutions. The key is finding one that suits your business.

One potential solution for cash flow issues in your business could be invoice finance in the form of either invoice factoring or invoice discounting. Both allow you to raise funds through unpaid invoices owed to your business (factoring covers the situation where the factoring company is disclosed to your client and they collect the money due, whilst with confidential invoice discounting you are responsible of the collection of client monies into a trust account). This gives you a quick fix for short-term cash flow problems and sees funding secured against invoices rather than your other assets, so could be ideal if your business finds itself with unpaid invoices during this period.

Another possibility is sale and leaseback of your equipment. If you are facing a downturn in productivity, you could consider selling excess machinery found in your production line, although that may be easier said than done. With sale and leaseback of your equipment, you can get extract money from these assets by selling it to a lender, who can then lease it back to you and thereby allow you to inject lump sums of cash back into your business, assuming there is sufficient equity available.

A third option is supply chain finance, which optimizes cash flow by allowing you free up finance stuck in your supply chains – as many manufacturers will have. You might be able to negotiate increased discounts and extend your own credit terms per se, whilst suppliers can get paid earlier, making it a win-win scenario for everyone. You will then benefit from increased working capital in your business, which can help you to weather the storm of COVID-19.

If you’re unsure of the options available for manufacturers, it is worth seeking independent advice from a finance broker who can take you through what is available and what is most suitable for you.

Plan your finance effectively

If you are seeking finance, it may be worth looking at what you can do internally to free up finance in your business. The best way to do this is to make a detailed plan of your current financial situation and work out any areas where you can trim costs; particularly if your business isn’t running at 100% output.

Cut any non-essential services you are paying for, halt any orders for unnecessary supplies, reschedule or renegotiate any payments you may owe and search for any other ways you may be able to cut costs and place additional funds back into your business. Remember: every little can help when it comes to keep your business in the best possible shape during hardship.

As well as taking stock of your current financial situation, it is important to look to the future and consider how the current downturn may affect your business moving forward, even once you start to recover from the obstacles of COVID-19. You should be running ideally a rolling 3 month cashflow as a minimum.

Get guidance tailored to your business

In times of struggle, any business may find themselves at a loss of what to do – and, if Make UK’s findings do become reality, manufacturers may find themselves having to seek out more than just government initiatives to allow them to survive this period.

The options laid out in the blog are a great starting point for manufacturers searching for solutions to financial difficulties – but, if you require further guidance, we can offer specific advice to your business to help you find the right support for you.

Call one of the team today for a free consultation on 0203 327 0567 or email [email protected].