Word on the Street: Funding manufacturing’s next generation
By: Growth Street
Tags: Manufacturers, Finance, Sme Financing, Manufacturing

Working with businesses across the Midlands and North of England, I see first-hand how some of the UK’s great cities are looking beyond their proud industrial pasts towards new economic possibilities. A city like Sheffield, synonymous for so long with steel and industrial manufacturing, is now focusing increasingly on the opportunities of advanced manufacturing: the development of cutting edge materials and processes that can be exported and sold around the world.

This is the manufacturing of the future: innovation which can both attract global investment and power world-leading companies. Just as the UK was known as the workshop of the world in the late 19th century, it can become the leader in this new generation of manufacturing — one that is not about volume and product, but technical proficiency and process innovation.

That is the opportunity, but the business model is not a simple one. Manufacturing businesses like these, with a strong R&D component, have challenging capital cycles. They need to invest heavily in equipment, while revenue is often clustered in projects which can make the balance sheet lumpy. Late payment is also an issue many face. As a result, manufacturing businesses often struggle with cashflow. They have many short-term investment demands, none of which may realise a rapid return. It’s a business model that is cash hungry but often uneven in the way it generates revenue and profit.

This is compounded by available funding schemes that tend to emphasise long-term horizons over short-term needs. While it’s undoubtedly true that manufacturing businesses need to invest for the long-term, they also have significant demand for working capital that can bridge the gap between making new investments and realising the return on them. It’s on this basis that we work with numerous manufacturing customers. In fact it’s one of the sectors we do most work in.

Through our GrowthLine working capital product, we are able to provide manufacturing customers with a line of credit that can ease cashflow needs. By setting a credit limit tailored to a company’s assets and work-in-progress, we can provide access to funding that’s closely calibrated to its situation and specific needs. Where many of the funding options available to R&D intensive businesses emphasise the long-term, GrowthLine works a lot like a business overdraft to provide headroom and reassurance to meet immediate costs. One customer, which manufactures vacuum lifts, has used GrowthLine to supplement other funding solutions it was already using. Replacing it’s invoice finance provider, it brought in GrowthLine alongside an existing Enterprise Finance Guarantee Loan, allowing them to access the working capital needed to fund the next stage of expansion.

Manufacturers are looking for this kind of funding because, among those I encounter, many are hoping to invest and grow. It’s true that political and economic uncertainty is holding back investment in some sectors, but manufacturing companies cannot afford to sit back and wait for the outlook to clear. These are businesses that must think in multi-year investment cycles: delays now will create an opportunity cost that compounds long into the future.

The businesses I meet cannot afford to be too patient. In many cases, they also lack the revenue certainty and funding options to invest aggressively. The economic uncertainty cannot be wished away, but the funding gap can be filled, as it must be if cities like Sheffield are to fulfil their potential. We hope to play our small part in achieving just that.

Find out more about GrowthLine or give us a call on 0808 123 1231.

Michael Ellis is Head of Sales for Midlands and North at Growth Street