Finance for business isn’t ‘one size fits all’, says Embark

In the wake of the government extending the ‘Funding for Lending’ scheme until January 2014 and ongoing mixed views on the Business Bank, corporate finance brokerage Embark is warning businesses to remember that funding tailored to the needs of a business, and its owners, is at the heart of a workable finance solution.

Midlands-based Embark Finance, which specialises in sourcing alternative finance through raising working capital by leveraging assets within a business, says that whilst these government schemes are in general good news, businesses must remember to distinguish between funding growth and funding a business that is standing still.

“If businesses are looking for traditional bank loans to fund working capital then the most pressing job is to educate them that these deals are less likely to reach a positive outcome unless funding is for a very well established business which offers minimal risk to the lender,” explains the firm’s co-directors Richard Keenan and Mike Bailey.

“We are in a climate that requires business owners and directors to accept that their business will probably grow at a slower rate than before the economic downturn and importantly, within the constraints of the security they can provide against the risk involved.

“This is the key reason why Invoice Finance works so well. It simply allows the business to sell a product or service and leverage cash against the invoice, with logic saying that the more sales you have, then the more cash you can access.

“Peer-to-peer lending works well for businesses that have a project or a phase of growth that requires cash for a specific reason, but not for funding day-to-day working capital.”

The government’s £20m cash injection is great, but not enough, according to Richard Keenan: “In my opinion, based on the number of businesses that are struggling because they don’t have sales not cash, this extra cash simply isn’t enough to go round. So many businesses have the enormous potential to sell or grow into new and different markets, but it is these businesses that are constrained by the cash available to support these new and evolving opportunities. In my experience, these deals are frequently for businesses that have invested significant time chasing orders, without the tools or knowledge of how to fund them if they win them. So when the new opportunity turns into actual business, they have no logical way of funding it.”

Embark is also warning business owners to remember that all lenders need security for every type of funding: “I recently explored a financing deal for a business looking to fund working capital for growth, but which doesn’t want to provide the security required. So, the deal hit a brick wall. This isn’t because the business can’t access cash, but because its business owners/directors can’t accept the landscape has changed. Like it or not, currently there aren’t many businesses able to borrow money in any form, without providing guarantees.”

Embark Finance, based in Lutterworth and founded in March 2008, is an independent commercial finance brokerage within invoice finance, factoring, asset and trade finance. The firm specialises in raising working capital by leveraging assets within a clients’ business. It is regarded as a trusted and knowledgeable broker, considered by many of the UK’s biggest providers and introducers as one of the top six brokers in the UK.