10.09.2016

Help for SMEs to meet orders held back by tooling costs

Preparing to fund a capital investment is a challenge for any SME. When a significant amount of that investment is required to finance the tooling needed ahead of an order, the challenge increases. All the funds set aside for business development can be absorbed before production begins. As a result, many manufacturers will require additional working capital simply to support the orders they have secured.

Sourcing that additional cash from a bank can be difficult, particularly in the limited time available between securing the order and the contracted delivery date. New businesses without a solid track record will be particularly hard-pressed. And while they are waiting for funding, they are effectively losing money.

TAEFL plans to help SMEs benefit from lower Pound

Therefore, in order to help SMEs who are in the manufacturing industry, TAEFL launched a £1M tooling fund on September 14 at its breakfast seminar with two other companies which also have tooling funds based on different criteria. The TAEFL fund will be open to all UK manufacturers but is targeted primarily at the automotive industry.

The funding will allow manufacturers to complete their tooling line and start production without having to wait while they source the funds required. Even if there are existing lenders in place that will not be a problem as TAEFL will work alongside them to gain the best outcome for the client.

Certain criteria must be met before an application can be made to the fund. The business must be a limited company, enabling credit insurance to be obtained, either the client or the end purchaser must be creditworthy. The maximum period of risk would be 90 days as this is only a short term solution, but there are other companies which can provide longer term funding for tooling. The facility requested must be between £20,000 and £250,000.

TAEFL will look at the performance risk of the business in order to fund the tooling. It’s worth noting that TAEFL will fund up to 75% of the purchase price of the tooling and also contribute to the cost of its manufacture. TAEFL would take a charge over the assets being funded; typically a Chattels Mortgage over the tooling itself. The director would have to give a personal guarantee which isn’t supported by property and there would be a debenture over the company and a direction to pay from any existing lender.

By providing this £1M tooling fund, TAEFL is hoping to bridge the gap between the expense of setting up a tooling line and the ability to use those facilities to produce goods that can be sold. That means manufacturers won’t have to turn down orders because they have a restricted cash flow. Instead, they can undertake larger orders and increase their reputation amongst their competitors.

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