28.11.2015

Flexibility leads to optimal solution for client

In the eyes of conventional bankers with a box-ticking mentality, flexibility is a sign of weakness. They see rules about to be broken, with their own best interests in jeopardy and an adverse impact on the bottom line. If every business deal that needed to be financed followed a rigid formula, that view might even be justified.

But in the real world of the SME – a broad canvas that covers 90% of UK businesses by employment – few companies observe a cookie-cutting conformity. Small businesses are as diverse as the people who run them: the micro enterprises in that spectrum are often run by individuals very closely identified with the business and who make all of the decisions single-handed.

Providing financial assistance for the SME is never going to be easy, therefore. Those involved in arranging or providing funds for this sector need to be flexible and responsive, while seeking to control the risks associated with the proposition. In order to serve the interests of the business and the funder, it is necessary to guide applicants to the source of finance most appropriate to their needs, even if it means an institution walking away from a potentially attractive financial return.

It takes experience – and a deep understanding of the marketplace – to be able to open the right doors and support both parties with accurate information and an honest appraisal. If handled correctly, the SME gets the funding it needs, while the lender (for it is usually loan finance rather than equity which is needed) is comfortable with the risks.

Would TAEFL provide funds for security company?

A company from the East Midlands was recently introduced to the team at Trade & Export Finance by its financial adviser who had seen that company initiate support for clients at every level from funding an order, to advising on a change of bankers  and sponsoring companies on peer-to-peer lending platforms. Its client provides specialist security facilities under contract to public and private sector organisations in the region. It was seeking additional working capital; in part to expand its operations, but also to permit the controlled exit of the founding shareholder.

An option would have been for TAEFL to arrange finance against the value of the contracts it holds. One is with a high profile retailer on whom TAEFL could easily have taken credit insurance to secure any funds it provided. UK EXIM and UK EXIM Finance were both established by Trade & Export Finance to provide specialist finance in situations like this.

On analysing the requirements of the security company, however, it was felt that these could be met more effectively through a simple invoice discounting arrangement with a leading player in that field. TAEFL made the introduction and ensured that the case for funding was presented in the best light. The deal was completed on terms which were acceptable both to the client and the invoice discounter.

TAEFL opened its doors seven years ago essentially as a financial consultancy guiding clients as they changed bankers, for example, or writing Letters of Credit for export deals. In helping the security company identify and then address the third party best able to assist, the TAEFL team was continuing this tradition of providing a flexible response to SME requirements. As a result, the security firm went away satisfied and the invoice specialist gained a well-researched client. And the Trade & Export Finance team felt it was a job well done; a real success story.

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