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• 19 Sep

  Components Manufacturing Factoring Case Study For Domestic And Export Sales

  FundInvoice helped a small but growing UK manufacturing company arrange a non-recourse factoring facility to support both its domestic and rapidly expanding export sales.

  The company manufactures specialist steel, silicon and plastic components used in instruments and instrumentation. As the business grew, increasing sales created a corresponding need for additional working capital.

  The Cash Flow Challenge

  Growth can create a cash flow problem for manufacturers because the costs associated with producing an order often have to be met well before the customer pays.

  Materials need to be purchased, components manufactured, and staff and other production costs paid. When customers are then allowed credit terms, cash can remain tied up in unpaid invoices.

  This manufacturer was also seeing particularly strong growth in its overseas business. Export opportunities were becoming an increasingly important part of its sales, but faster growth also meant that more working capital was being absorbed by outstanding export invoices.

  This issue can arise with successful exporters. An overseas market can sometimes develop faster than domestic sales, creating an attractive growth opportunity while also increasing the cash tied up in debtors.

  Factoring UK And Export Invoices

  The company approached FundInvoice for a solution that could support its continued growth. We searched the market and arranged a non-recourse factoring facility covering both UK and eligible export invoices.

  For its domestic sales, invoice factoring allowed the manufacturer to access funding against eligible unpaid invoices, rather than waiting for customers to reach their normal payment dates. As new qualifying invoices were raised, the facility could provide additional working capital to help support continued growth.

  The overseas element was also important. Specialist export factoring facilities can provide funding against eligible overseas invoices, allowing businesses to support international sales alongside their UK business.

  Why Non-Recourse Factoring?

  We arranged a non-recourse arrangement for the manufacturer, which included bad debt protection subject to the facility's terms, credit limits, and conditions.

  This was particularly relevant because the company was dealing with a growing portfolio of customers in both the UK and overseas.

  Non-recourse facilities normally cost more than equivalent recourse arrangements because of the added protection. Businesses considering this type of facility should compare the added protection with the extra cost. Our invoice finance costs page explains typical charges and factors that can affect pricing.

  The Result

  The new factoring facility gave the manufacturer access to working capital linked directly to its eligible outstanding invoices.

  Rather than relying solely on existing cash resources to fund increasing production and then waiting for customers to pay, the business could release cash from its sales ledger earlier.

  Importantly, the facility covered eligible UK and export debts. This meant the funding structure could support the part of the business experiencing particularly rapid growth, rather than restricting finance to domestic sales.

  For a relatively small manufacturer with ambitions to grow internationally, this provided working capital that could increase as the business expanded.

  Finding The Right Factoring Company

  Numerous invoice finance companies operate in the UK, but their appetite for manufacturing businesses, export debts, and non-recourse facilities can vary.

  In this case, the requirements went beyond simply finding a company willing to fund invoices. The manufacturer needed a provider whose facility could accommodate its specific mix of manufacturing, UK customers, overseas customers, and bad-debt protection requirements.

  This illustrates why comparing facility structures can be as important as comparing headline prices.

  Invoice Finance For Manufacturers

  Manufacturers can have particular working capital requirements because they may spend on materials, labour, and production well before customers settle their invoices. Growing order books can therefore increase, rather than reduce, the immediate need for cash.

  Our specialist guidance about invoice finance for manufacturers explains how these facilities can help manufacturing businesses bridge the gap between production costs and customer payments.

  For a broader overview of the different funding options available, see our main invoice finance page.

  Looking for factoring for a manufacturing business? Call FundInvoice on 03330 113622 to discuss your requirements and have us search the market for suitable options.

  By Glenn Blackman