I have included below an example of where Lock Finance has been able to assist a transport business with increased working capital facilities.
We were recently approached by a transport business who had some asset financing with a major trading bank and an overdraft facility. They also had some vehicles and trailers financed with a main asset financing/leasing company.
The business was growing and required additional working capital facilities to help fund their increasing weekly wage bill, larger fuel and RUC bills.
They had good debtors but they paid between the 20th and the 10th of the following month. This was placing significant strain on their business overdraft and the owner.
Their banker was not able to assist anymore as the client was at the peak of their security (the overdraft was secured against the owner’s house which still also had a mortgage against it).
Lock Finance got introduced to the business and have been able to approve a facility that will ensure that they will be able to meet their wages weekly, provide enough to cover their monthly commitments without the pressure of hoping their debtors will pay on time.
We were able to provide our Invoice Financing facility that will grow as their revenue grows without needing to provide any additional security. Our security was just the debtors themselves, we did not need their property or vehicles as security.
The client was very happy and the other funders were not impacted at all.

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McInnes Manufacturiing 

McInnes Manufacturing is a family owned business based in Waipu, Northland.  Their innovative, award winning plastic rotational molders for calf rearing were born from years of dairy farming experience.

The organisation previously had an Invoice Finance facility with another finance company that was unsatisfactory and a decision they ended up regretting.  Fortunately, turning to Lock Finance was a decision that was quite the opposite.

Ross Papworth, Financial Controller explains that dealing with Lock Finance “has been a sensational experience”.  Their more flexible Invoice Finance facility opened up the ability to use their cashflow more effectively and grow their business globally.

McInnes Manufacturing now exports to Europe, USA, South America, Australia and China and working with Lock Finance allowed them the opportunity to develop these markets more vigourously.

Ross says that the systems in place at Lock are “simple, very easy and quick! The staff are incredible and make things straight forward”.

Digitech Services 

When it comes to embroidery on all forms of apparel - hats, shirts, bags etc Digitech Services are experts. Being a successful growing business they need to import various articles of embroidable merchandise well in advance of key seasonal demand.
 
To facilitate this and minimise pressure on cashflow, Choppa Casey, Managing Director of Digitech Services chose Lock Finance as a business partner in early 2014. Recommended by existing customers Choppa was nervous about moving into new territory with Lock Finance. However, 7 months into the relationship Choppa rates Lock as "outstanding" and "really good to deal with" and most importantly now a valuable asset to his business.
 
At Lock Finance, the feeling is mutual with the added benefit of having an expert supplier for our requirements of branded apparel.

Senco Brands

Senco Brands are responsible for putting a roof over many New Zealander's heads. As suppliers of fasteners and tools most of the prenail frames that make up New Zealand roofs have probably been touched by the Senco brand. Two years ago Senco purchased their existing New Zealand agent Timberlock. Mark Glidden who was a Director and Shareholder of Timberlock then transferred to the new business and therefore brings a significant history not only the business but dealing with the financial requirements of the business. Despite dealings with two of the largest trading banks, Mark was not able to experience the promises of business partnership. This despite significant stock inventories and a list of blue chip customers including Mitre 10, Placemakers etc.

However, having been introduced to Lock Finance, Senco have now found a true business partner. One of the key differences that Mark has experienced is that in contrast to previous trading bank relationships Lock are actually interested in Senco's customers and have taken the trouble to understand the business. For example, Senco imports a significant amount from China. However, given the virtual close down of Chinese exporters for the month of February to celebrate Chinese New year, there is an annual need to increase stock holdings prior to February in order to take into account the lack of deliveries during and subsequent to February. Lock understands these seasonal challenges to a business like Senco and is there to provide the appropriate level of support.
 
For Senco, the days of being refused a $50,000 facility by a major trading bank against receivables security of 1.2 million and stock security of 1.5 million are gone. Also the days of spending $13 million with a bank over a period of 5 years and receiving no communication in that period is also over. Thanks to Lock Finance.

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Since the GFC cashflow management has become an even larger challenge for SME business owners. It was not just the economic  fallout and the banking crisis it was also when a significant change occurred in the stock management of a business and the flow on effect in the cashflow cycle of a number of businesses. Managing stock was more critical so that a business was not sitting on slow moving or surplus stock. So more businesses ordered smaller but more regular quantities. So if sales slowed or grew they were in a position to react quicker with reduced impact. They also looked to manage their creditor and debtor days more efficiently. The larger companies were able to seek longer creditor terms and seek shorter debtor terms. The SME was the one that basically had to wear the fallout and just take the terms dictated to them. So without a plan for managing their creditor, debtor and stockturn a business can very quickly run out of cash.

Now that times seem better and more businesses may be in a growth phase they need working capital facilities and funders that can be as flexible as their cashflow requires. This means the ability to finance growing sales quickly and to provide additional working capital facilities. For SME's most working capital facilities are linked by traditional financiers security requirement which is the shareholders personal property without placing a reliance on the debtors or stock of the company. This can restrain a business that is experiencing good growth.

Invoice financing facilities generally have no requirement for brick and mortar security and will grow as credit sales are made.

The generic term of Invoice Financing encompasses a couple of Invoice lending products from Single Invoice Lending through to the Full Service Factoring model which includes a debtors management service  through to the undisclosed prime Debtor / Invoice Finance model. These facilities suit different size businesses and businesses at different stages of their cycle.

These facilities have been offered in NZ for approximately 20 years however they have been standard finance products that have been offered in most major trading nations significantly longer (centuries ago).  

Over the years technology has played a major role in the understanding and demystifying  of these invoice lending products by adding visibility and allowing efficiencies. Technology is also playing a significant role in cashflow management with financial modelling software which shows the business owner the benefit of reducing debtor days by 1 day or week and delay in paying creditors (shouldn't  say that should we) and also by improving your stockturn.  Whether this is shown by figures or by graphics it is now something that most business people can easily understand without needing an Accountant to interpret for you.

A business owner needs to be able to implement controls and policies for the management of their cashflow, debtors and credit control. This is best done by understanding their working capital cycle and implications associated with obtaining credit and extending  credit. Careful management can reduce their working capital funding requirement. Getting proper advice that takes into account all aspects and not just the cheapest option. Also understanding  the PPSR allows businesses to implement and register securities over their stock sold to secure themselves from potential loss which can have a significant impact on a business.

As the saying goes CASH IS KING.

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Now that I have caught your attention I thought that I would share a couple of experiences that a couple of our clients have had.
But first of all I wish to point out that unlike "most" of the banks, Lock Finance are able to assist with the funding of tax arrears.
We have only recently approved a Debtor Finance (our undisclosed facility) Facility to a couple of our new clients that have or had tax arrears.
One of these clients was a profitable business that was generally paying its ongoing PAYE and GST but by the time the shareholder took their generous shareholders salaries out of the business the company ended up with insufficient cashflow to allow the business to pay its tax obligations. As this was not the first time they had done this their bankers were not prepared to assist. The company's equity had reduced and the shareholder had no more room in their property to leverage against.
It was recommended that they contact us to see whether we could assist.
We could, we have provided a Debtor Finance Facility to assist with a lump sum to repay and clear their IRD arrears and provide an additional facility (on top of their bank overdraft) to assist their cashflow.
The second client was a bit different where they had been through a difficult trading period over the past couple of years and had significant PAYE and GST arrears. The company had just picked up some new clients which was going assist their turnaround but the IRD were putting significant pressure on the company to tidy up its tax position. Their bankers were not able to assist due to their trading position and also the tax arrears.
Their bankers referred them to Lock Finance to see if we could help.
We could, we approved a Debtor Finance Facility that would free up some monies to allow a part principal repayment off their arrears. Together with their Accountant they proposed a repayment arrangement to the IRD who accepted the proposal on the basis that they receive a lump sum and they keep to the proposed monthly repayment. We were able to provide the lump sum from the initial drawdown of the facility and are providing monthly funds so that the repayment arrangement could be adhered to.
If you have a client that has some tax arrears or creditor pressure and their bank is not willing to assist any longer then why not contact me to see whether it is something that we would assist with.

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The growth of debtor and invoice finance as a more appropriate and flexible tool to support the growth of businesses on both sides of the Tasman has been confirmed by figures recently released by the Debtor and Invoice Finance Association of Australia and New Zealand (DIFA).

As a result of steady increases, debtor finance (discounting and factoring) in the 12 months to the end of December 2013 totalled $63.3 billion provided to Australian businesses. This figure represented an increase of 10.8% when comparing the first half of 2013 to the second half of the year. This increase was a reflection of businesses proactively seeking flexible finance solutions to offset the burden of poor cashflow in advance. As SMEs on both sides of Tasman become more familiar with the ability to leverage their debtors ledger and enhance cashflow, this trend will continue with New Zealand businesses increasingly taking the lead from their Australian counterparts.

Lee Clarke, Chairman of the Debtor and Invoice Finance Association also points out that in addition to the well recognised benefits of freeing cash and utilizing improved cashflow positions to obtain early settlement discounts from suppliers/creditors, the benefit in the saving of management time spent in chasing slow payers that could be better spent on areas more appropriate to their responsibilities cannot be underestimated.

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With the finalisation of many companies 31 March year end accounts, now is an appropriate time to review not only the performance of the business over the last 12 months but opportunities for change and enhancement.

Part of managements review of historical financial performance will include the ease with which the business has been able to operate within the parameters of existing banking arrangements. This consideration is of particular relevance to businesses that are looking to balance their sales growth and cashflow needs, which as the economy improves may require a higher level of facility then their bank currently provides.

Lock Finance along with others in our industry sector are experiencing an upward trend from businesses that are not comfortable in continuing to provide property as a security for their business or who may have some tax arrears after a period of poor trading results.

The flexibility that Lock offers in releasing cash tied up in the debtors ledger plus a potentially higher level of facility than the bank may provide are complimentary benefits to ensure that the year that will be is better than the year that was.

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Not quite but significantly reduced levels of stress.

Running any business can be a stressful exercise for all businesses and in particular, small and medium size enterprises. The creative tension between accepting an order and the confidence of being paid on time can not only become a drain on the businesses cash flow but also add considerable stress and downtime when the debtors ledger starts to age.

Reducing both the owners and business stress in this area is a particular strength for Lock Finance. Our ability to bring certainty to invoice payment, we have observed, brings with it the ability to grow businesses faster based on the security of knowing that cash will be in the bank on time every month when Lock Finance is part of the picture.

Our invoice financing facility is used by a broad range of industry sectors and allows the business and its suppliers to have confidence to know that payments will be met on a timely basis, that investment decisions can be made with a high level of confidence and that businesses can plan to optimize their business growth.

 

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As the pace of economic recovery quickens, so too does the likely response of the Reserve Bank in terms of steadily increasing home mortgage lending rates. As these rates rise to more closely aligned with historic averages, this again puts the spotlight on the most appropriate way to structure business finance. Whether this finance is to support growth of new and existing business or just a more efficient way of sustaining day to day trading, Lock Finance has a long history of providing practical and flexible financial support. We typically do this without relying on the family home as security and yet are still able, in most cases, to offer a high level of support than is available from the banking sector.

Our business model is designed to provide our customers with a flexible yet appropriate level of financial support as business cycles require. At Lock, we have a policy of supporting our clients only when they need it and therefore minimising the cost associated with the facilities we provide.

Our lines of communications are short and as we are not a bank, our response times are highly tuned to the ever changing needs of our clients.

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Check your mailboxes early next week for the latest edition of our newsletter "Locked & Loaded".  Topics covered include NCI's Quarterly Trade Credit Risk Index Update, a case study for Walker SEP Surveyors & Planners, the Kiwi's remarkable comeback, the latest financial commentary by Rodney Dickens and a tax solution to ease provisional pain... PLUS, a chance for referrers to WIN a 32" Samsung HD Smart LED TV (conditions apply).

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