The UK timber industry is among the most modern and competitive in Europe. And as economic trading conditions improve, timber companies have increasing opportunities for growth.
The UK construction industry, attracted by timber’s renewable, low-carbon properties, has opened its eyes to wood’s potential.
The use of home-grown wood is also on the rise thanks to innovative new uses for timber and the simultaneous revival of many of wood’s traditional applications.
The Forestry Commission reports that the UK industry contributes more than £7bn a year to the UK economy and employs 167,000 people in timber trading, processing or growing.
But despite the industry’s size, value, potential and ambition, like other sectors, it is still emerging from economic downturn and many businesses may be finding it difficult to move forward and make the most of these emerging opportunities to grow and develop. This is particularly true for SMEs, which make up a large percentage of businesses along the timber supply chain; from timber growers to sawmills, importers, distributors, manufacturers and retailers.
At Lloyds Bank Commercial Finance, however, we’re committed to supporting UK business of all sizes, including SMEs, and helping them unlock their potential by providing alternative sources of funding. Significantly, these include asset-based finance.
Asset-based finance can allow firms to access cash tied up in their stock, plant and property – money that could be put to better use funding investment or paying overheads. This was previously been seen as a niche service, but it is now widely used as part of the mix for financing firms’ growth.
At Lloyds we combine asset-based finance with more traditional financial products and the positive feedback from our SME clients underlines that this is providing the right solution at the right time.
Another form of asset, against which companies can also secure finance, are outstanding invoices. On the negative side, these represent restricted cash flow which can rob businesses of opportunities to grow and ultimately even cause them to fail.
At Lloyds Bank Commercial Finance we are all too aware how this issue can stifle the ambitions of firms, even in sectors with real growth potential, like timber. Consequently we offer a range of invoice finance solutions. Different criteria apply for each product. But if your turnover is at least £50,000 and you sell to other business on credit terms, the chances are there is one for you.
Smaller firms at the bottom of that scale often find that factoring is a useful option. It frees up working capital by giving businesses up to 90% of the value of their issued invoices, so they don’t have to wait months for payment. The bank also takes over the management of the firm’s invoicing and sales ledger, helping flag up risks and freeing up time and resources.
Products such as invoice discounting and factoring can also be useful in supporting those in parts of the industry that are seasonal, helping create an even, steady income stream and smooth out cash flow.
For businesses with a turnover of £250,000 or more, which prefer to keep control of their invoice and credit control processes, invoice discounting can provide an alternative. It unlocks up to 90% of the value of invoices, often within 24 hours of their being issued, and enables businesses to carry on processing payments from customers as normal.
Among our customers that have recently used some form of asset-based finance solution are family firm Woodscape, which makes timber street furniture from its base in Blackburn, and Solihull-based Arden Wood Shavings. Both have used asset finance to invest in their premises, giving them room to create jobs and fulfil bigger contracts.
The timber industry is a vital and dynamic sector and my colleagues and I are committed to supporting these and other businesses in it to help it thrive at this crucial time for UK plc.
Banks that back SMEs
Banks have developed a reputation in the recession for turning their backs on small to medium-sized enterprises (SMEs). But Lloyds and Triodos say they’ve developed products and services to specifically support the sector.
Lloyds says its SME lending is growing 5% a year and in late 2012 it launched its Manufacturing Commitment to provide £1bn of new lending to SMEs. It is also taking part in the government’s Funding for Lending Scheme, under which it offers 1% discounts to all SMEs for the life of loans, committing £6.3bn so far. It takes part in the Enterprise Finance Guarantee scheme too and is providing £100m to SMEs through the Regional Growth Fund. It says its monthly PricePlan also helps SMEs adjust monthly charges to suit their business and offers 18 months free day-to-day banking for start-ups.
Triodos, which focuses on sustainable industries, says most of its customers are SMEs and that it has doubled lending in five years, "meeting growing demand for sustainable finance". Recently it launched new retail bonds for organisations looking to raise capital without relying on loan finance.
Its advice to businesses looking for funding is to give bankers a "clear and well thought out business plan, which covers financial details, management experience, and considers potential risks".
