Britain is the ninth largest manufacturer in the world by output, with exports totalling £275bn last year, according to the manufacturers’ organisation Make UK.
Small and medium sized manufacturing firms make a significant contribution to the success of the sector as a whole.
Yet despite the importance of the sector and the SMEs within it, many find it difficult to access the funding they need to grow.
What’s the issue?
We know that too many SME manufacturing businesses struggle to access capital. But why?
The answer is that while banks can fund an amount that reflects the assets in a business, they can’t help if a business has no further assets to borrow against.
As a result, SME manufacturers can reach a limit.They cannot raise further bank financing to develop their business if they do not have additional assets to offer to lenders as security.
Prevented from additional secured funding, many business owners often have to consider giving up equity to raise funds or agree to personal guarantees.
Our research of 300 SME business owners shows more than half do not want to issue equity and dilute ownership to fund growth. Instead more than three quarters would prefer to raise money through long-term debt, if they could.
We call this the “equity dilemma” because business owners are forced to choose between growth or ownership.Many SME manufacturing business owners face it.
The lack of access to genuinely unsecured lending is a critical barrier to growth in the sector.
What’s the solution?
Many growing SMEs need unsecured lending of between £500,000 and £5m.Often, the businesses looking for loans of this size are too big for peer-to-peer platforms but too small for banks and debt funds.
Caple is the first in the UK to offer long-term unsecured lending, based on the future cash flows of the SME.We do not require collateral or personal guarantees as security.
The loans we provide access to also complement existing bank funding or asset based lending, which many SME manufacturers may already have in place.
We help SMEs access unsecured lending through their accountants and business advisors.Any manufacturing business looking for funding should first speak to them.
Their accountant or corporate finance advisor will assess the the eligibility of their business for funding, supported by our technology platform.They then prepare business plans and financial forecasts that make the case for funding.
How we help
Proving the appetite for unsecured lending in the sector, we have recently completed three deals for UK manufacturing firms.
We supported Intastop, which designs and manufactures specialist internal building protection products for doors, walls and people, with a £700,000 eight-year fully unsecured loan.
Intastop plans to use the funds to invest in the machines and people it needs to manufacture more of its products in the UK.
We’ve also supported Grayson Thermal Systems, a leading design and manufacturer of engine cooling, heating, ventilation and air conditioning systems, with a £2m loan.
Grayson will use the loan to invest in product development in key growth markets such as electric vehicles. The firm is also going to establish a new production facility.
Most recently, we helped Spinnaker International Ltd, a world-leading manufacturer of cash protection boxes and asset tracking technology, with a £3m loan.
Spinnaker will use the loan to increase its presence in new geographical markets. It will also invest in research and development, through its new innovation centre. Spinnaker expects to create a further 15 to 20 jobs as a result of its growth plans.
In total, we have completed more than £23m in deals. Given the benefits of unsecured debt finance, we anticipate doing a lot more.
In all of our deals, the SME business owners were keen to access funding to drive the growth of their business. But they wanted to do so in way that meant they retained control and that it supported the funding they already had in place.
When manufacturing firms contribute so much to the UK economy, we need to help them secure the finance they need to grow.
We can do this without pushing them towards diluting equity and losing control.