We are increasingly seeing our clients face higher interest rates and charges when they come to renew their funding facilities and feel they have no option but to renew on those terms. We strongly advise taking the following steps in advance of renewal dates so you are not forced to accept the offer put to you without knowing whether it’s the best available:
1. Plan well ahead – it’s useful to understand in advance what the level of your borrowings and facilities are likely to be at your renewal date and whether you need to maintain, reduce or increase your current facilities.
2. Update your cash flow – as part of your planning process it’s important that you have the facts at your fingertips to help determine future needs. Having up to date robust cash flow projections is critical, particularly if you need to plan for changes in the business. Wilson Henry are highly skilled and experienced in making finance proposals to funders and we know exactly what information they are looking for and how it should be presented.
3. Understand what funders’ debenture cover means – the rates you are being charged will not only reflect current trading conditions specific to you and your sector but also the security you are offering lenders both in terms of debt repayment cover (number of time operating profit covers debt servicing ) and asset cover in terms of the valuation of assets pledged compared to borrowings. We can provide you with an independent assessment of whether you are a good risk to lenders and what rates you can expect to pay.
4. Review the market – certain banks will have more appetite for certain business in certain sectors than others. Don’t assume your current lender will necessarily be offering the best terms. We can help you in appraising the market.
5. Have the right mix of finance – it may be the case that you should reconsider the types of funding you have in place and whether it’s appropriate and fit for purpose. Are you, for example using short term finance (eg overdraft) to fund long term investment? We can quickly assess whether your current funding structure is appropriate for your needs for today and beyond.
6. Speak to Wilson Henry! – we are entirely independent and have access to a wide spread of funders of all types (not just banks) so can help you review your needs and so help advise what works best for you on reasonable terms that reflect your business risk.
I very much welcome the opportunity to have a chat about your current funding facilities and future needs!