Experts reveal how businesses can raise capital and improve cash flow
- Selling unused assets is a quick and easy way to raise capital
- Auction experts share advice on raising capital to support business resilience
As the economy emerges from the COVID-19 pandemic, businesses across the UK are assessing the impact the last two years have had. Combined with rising fuel, material and labour costs, interest rate rises, and inflation at a 30-year high, businesses are feeling the squeeze.
With over 1.6 million businesses receiving Coronavirus business loan schemes worth over £80 billion¹ since the start of the pandemic and an 87% increase in monthly searches for ‘business resilience’, Yorkshire online auction specialist BPI Auctions has worked with reputable experts to provide advice on raising capital and improving cash flow to support business resilience.
Sell unused assets to release the capital
Most businesses will have unused assets on their premises they could turn into capital, but they simply get overlooked as they’re no longer used. Just because they’re not valuable to you, don’t underestimate their value to someone else, says Henry Spencer, Sales Director at BPI Auctions, “The scarcity of newly manufactured plant, machinery and equipment during the pandemic led to a boom in the prices being secured for second-hand equipment. We saw our monthly construction, plant & machinery auctions returning approximately 30% more than pre-pandemic levels and prices are holding.
“By selling at auction, from the moment you issue an instruction for equipment to be listed online, assets will sell within a selected short period, often selling 3-4 times faster (on average) than selling privately.”
However, a word of caution from Spencer: “Make sure you are clear on terms and costs before agreeing to any sale. Work with transparent and cost-competitive outlets offering options to sell from your site with no fees on unsold goods. You can quickly eat away at any sale return if you get lumped with costs you didn’t expect.”
Work with a Intermediary to find the right borrowing deal for your business
If you don’t have any assets to sell, you might want to look at leveraging assets you have capital tied up in. This is often the case for large pieces of product and machinery such as excavators, cranes or piling rigs , but where do you start? Alex Beardsley, Joint MD of ABL Finance, says: “Asset finance is where a lender agrees to extend a loan in return for taking security over some of your company’s assets. The financing might be based on a single asset, such as a piece of machinery, or a whole series of assets, like a fleet of company vehicles. It is suitable for a wide range of both new and used assets, including equipment, machinery and vehicles, and adverse credit isn’t usually a problem.
“However, with a range of asset-based lending products on the commercial finance market, working with an independent commercial finance consultancy to ensure you are aware of all the options is key. They will assess options like whether you should use one lender for the full lending facility or break it down across several to help you structure the best facility for what you want to achieve – allowing you to make a full informed decision on what is right for your business
Look at alternative channels to turn surplus stock into new revenue streams
Over the last two years, businesses have been affected by multiple lockdowns, Brexit, and most recently, Russia’s agenda, disrupting global supply chains with long delays and shortages. Alongside the increase in storage costs, many SMEs have sought new channels to turn surplus stock into working capital.
Henry explains, “In addition to one-off stock clearance auctions, we’ve also seen an increase in repeat vendors from large plumbing, flooring and timber merchants. Most will use a regular repeat auction sale to complement their existing retail and trade offerings to translate excess stock into cash on a monthly basis.”
Approach an alternative lender directly
If your bank has rejected your application for any further borrowing facilities, it doesn’t mean it’s the end of the road. Gemma Wright, Regional Managing Director at Reward Finance, says, “The lending landscape for SMEs has changed beyond recognition over recent years and many businesses still don’t appreciate that there is a whole market outside the more mainstream banks.
Business owners need both clarity and confidence from their funders and this is where the alternative lenders set themselves apart. At Reward, we talk a lot about speed of delivery but arguably what SMEs also need, right now, is certainty of delivery. Alternative lenders like ourselves take the time to understand a business, meet the owners and talk to them about their plans and aspirations. Lending decisions are made by experienced lenders, applying common sense and innovative thinking, not computers and algorithms.
Where you are struggling to get the support you need from your existing banking partner, I would always encourage business owners to talk to their advisors to help them navigate through the growing alternative lending market. I am confident that there is still the right support out there for SMEs, the biggest challenge currently is making sure that they know where it is”.
Health check your business first before selling
Before you sell any assets or commit to further borrowing, it’s essential to make sure it’s the right thing for you and your business moving forward. Business owners are programmed to fight for their companies, but sometimes taking on debt or releasing the capital left in assets might not be the best move.
Rob Adamson, Partner at Armstrong Watson LLP and a licensed insolvency practitioner, says: “We’d always recommend seeking financial advice from an accountant or a restructuring and insolvency firm to make sure you’re investing in the best path forward.
“If a business is operating under too much pressure, there may be other underlying issues that more cash won’t resolve and could even worsen. Even if it’s hard to accept, a different perspective could help you see the longer-term benefits of selling or even deciding to close your business.”
Adamson continues, “Seek out regulated firms, qualified and experienced enough to give you impartial and considered advice. Initial conversations should always be free, and make sure you feel that they’re motivated by the best outcome for you and your business, not what’s best for them.”
Business restructuring Case Study – Fabricom
Fabricom approached BPI Auctions to auction unnecessary and surplus equipment, including containers, engineering machinery, in-test access & lifting equipment, tools and welding equipment, in order to raise some capital quickly and reduce storage space.
Working alongside the team at Fabricom, BPI Auctions was able to provide a rapid turnaround, with collections taking place just one week after the sale end date.
The auction gained a tremendous amount of interest, with over 300 registrants. The total sales value was over £92,000, and 98% of all items put up for auction were successfully sold.
Henry summarises: “The past two years have been challenging for all sectors, not only with lockdowns and restrictions but with the introduction of Brexit and new regulations across industries.
“Selling used, and surplus equipment and machinery through online auctions is an effective and efficient method for businesses to recuperate capital from surplus or redundant items and compliments your business resilience strategy.”
If you’re restructuring your business and need to dispose of your assets, find out more: https://news.bpiauctions.com/experts-reveal-how-businesses-can-raise-capital-and-improve-cash-flow