Time to take stock and pick your partners
Tony Wan is commercial director at Hireco
February offers an opportunity to shake off the cobwebs and a period to take stock of what the remainder of the year holds for us.
Tumbling oil prices, a slowdown in China's growth, the prospect of leaving the European Union and see-saw financial markets are clear symptoms of economic instability and turbulent times ahead.
If you read and listen to the media, you could be forgiven for acting cautiously with any significant or ambition plans. The danger is that caution could lead to hesitation and before you know it, you have missed the opportunities that were there for the taking.
For us it is an ideal time to review our capital expenditure plans and working capital requirements for the year ahead.
Over the past three years we have invested more than £70m in new equipment which has been funded through a combination of cash deposits, term debt, on balance sheet hire purchase finance and off-balance sheet operating leases. We have used a variety of funding sources from high street banks to boutique finance houses and peer to peer lending.
Currently we have built up a panel of over 20 funders, each with different information requirements, risk assessments, margins of return, appetite, turnaround time frames and documentation processes.
It can be a minefield and needs constantly managing as the mix of funders are constantly changing as new funders appear and others fall off.
I start by reviewing each funder the same way you review all key suppliers. If you are not happy with the pricing, turnaround time, security required, your account manager or information requests then you need to replace them.
It's also a good time to pitch your business to funders as they would have had their previous year's achievements wiped clean and with new ambitious targets installed.
It can be difficult to move funders as inherently we are loyal to banks who have supported us before. In my case, 0.5% improvement adds £125,000 to the bottom line in the first year.
My advice is to take stock of your finance requirements, pitch them to a number of funders, review their replies and then select your partner. You will be surprised by the potential margin savings.
The benefit of doing this is that you can spend the rest of year focusing on value added activities that will grow your underlying business.