Innovation, flexibility and competitiveness have been the key factors in the timber industry’s ability to weather the storm of economic turbulence over the last four years.
These are exactly the qualities needed to succeed in capturing growth opportunities.
We’ve seen businesses develop real competitive advantage, particularly to meet enhanced environmental standards, not just in the product but in installation and waste management as well.
But the pressure is on to become inexorably more efficient to sustain margins in the face of rising costs and customer demand for value. That means investment and the worry is that if firms don’t invest, they may just end up running harder and faster for a smaller return.
Funding investment
Small and medium-sized enterprises (SMEs) are the heart of the timber trade and while there has been, and will continue to be consolidation, the focus and dynamic nature of an entrepreneurial company is, in our view, one of the strengths of this industry.
For the London 2012 Olympic and Paralympic Games, a panel of timber companies was formed to supply the Games venues, in compliance with strict environmental criteria, and following contractor approval this collaboration could be a model for the future.
Lloyds TSB Commercial’s strategy is to improve our understanding of our customers’ sectors and their individual plans so we can provide viable businesses with the finance they need to develop their businesses.
We continue to approve eight out of 10 requests for loans and overdrafts, and as part of Lloyds Banking Group we made £3.25bn-worth of gross funding available to SMEs in the first quarter of 2012. This means we are on track to meet our target of making £12bnworth of funding available to SMEs in 2012. We are also achieving lending growth on a net basis while the market is falling and we’re committed to sustaining this trend.
Accessing finance
Those businesses with good financial records and a well-considered business plan are always in the best position to raise finance. Most of our lending to SMEs is long term, so at Lloyds TSB we’re interested not just in the challenges over the next few months but for several years ahead and what that means for the finances.
Ultimately, we make lending decisions on the basis of an assessment of ability to repay but we see it as our role to help customers access a wider network of support, and think through the key opportunities and risks in their business. That’s why last year, we ran 700 customer networking events.
Innovative support
Beyond term loans and overdrafts, we know businesses want innovative banking products that meet the requirements of their company.
We are a cornerstone investor in the £2.5bn Business Growth Fund (see p21), providing equity to SMEs and we support the British Business Angels Association, a grouping of high net worth individuals looking to invest in a range of businesses, in facilitating the growth of private investors.
Through Lloyds TSB Commercial Finance, we can also offer invoice finance to support cash flow and asset-based finance to purchase new plant, machinery and vehicles. Both make it simpler to forecast outgoings and ease cash flow, as efficiency often depends on releasing cash and investing in the latest kit.
Funding for timber
This kind of support was used by South Devon-based timber merchant PI and MD Salter, when it decided it needed to invest in new machinery last year.
The business, which works with organisations such as the Forestry Commission and Euroforest to fell trees responsibly and turn them into timber products, purchased a modern new Komatsu 840.4 forwarder to transport logs from the forest. This was bought to replace an older vehicle which had become inefficient and expensive to run.
In order to meet the £210,000 cost of the machine, Malcolm and Alison Salter, who run the business, applied for a grant through the South West Regional Development Agency. The balance was sourced from a funding package from Lloyds TSB Commercial, which provided working capital, and from an asset finance facility from Lloyds TSB Commercial Finance.
Since buying the machinery, the business has been able to take on new contracts. Malcolm and Alison have also been able to employ their son full time and take on part-time workers to help with the increased demand for services.
This highlights the importance of a sustainable approach within the timber industry, and in partnership with the University of Cambridge, we have trained 500 business and environment managers nationwide on the science, opportunities and risks of climate change, so that they can offer support to SMEs.
The economic future
With UK growth flat and ongoing instability in the eurozone, the economic outlook for the remainder of 2012 looks challenging.
But for the timber trade, which is so entwined with the construction industry, there was cause for some optimism with the announcement in the March Budget that planning regulations would be simplified, cutting down on red tape with the aim of making it easier for builders to build.
At Lloyds TSB Commercial we’re optimistic about the sector and its ability to compete not just in the home market but in international ones too, where the opportunities remain significant. It’s our job to support that.
