- Give us a call. We find that an initial chat over the phone can often be the quickest way to decide if our debt solutions will be the best option for you. It should take no more than 10 minutes to establish eligibility. If we can't help, we can point you in other directions.
- High-Level information. Send us through the last 2-years accounts, any recent Management Information, cashflow forecasts and your business plan (if you have one). We will also use publicly available information to help us come to a view on how to take your proposal forward.
- Initial Recommendation. We will set out our advice on how best to raise debt for your business. There are usually a number of different options which we will discuss with you, often with considerable differences in pricing and terms. Using our long experience in both traditional lending and the P2P sector, we tend to know very quickly which lenders will be appropriate to any situation.
- Engagement Letter. If you wish to proceed, we will ask you to sign our standard Engagement Letter and pay a small commitment fee. All other fees and charges are success-based.
- Due Diligence. At this stage, (if we have not already done so earlier) we will visit your premises to meet you face to face and get to fully understand the business. You will also need to provide us with detailed information such as:
- Previous Accounts
- Sales Pipeline
- Aged Debtors & Creditors Listing
- Details of Contracts/Scheduled Work
- Background on Directors/Shareholders including asset/liability statements
Report. We will then write our report for one or more lenders. By this point we will already have had some informal conversations with their credit managers to gauge appetite so we know we're kicking at an open door. Negotiation. We will negotiate with the lender on your behalf to engineer the best deal to suit your proposal, with an eye to how any decisions taken now will affect your ability to grow the business and obtain further funding in the future; we sometimes find that what looks like the best headline terms now actually frustrates your ability to develop the business in the future. Accepting the Offer. Once you have accepted an offer, and depending on the lender, we will then liaise with solicitors to get paperwork produced and signed quickly. Drawdown of Funds. Drawdown follows after the paperwork is signed. In most cases, lenders are keen to get their funds deployed quickly following the initial agreement to lend. Ongoing support. Ludgate like to have an ongoing relationship with their clients, especially where funding is part of a linked strategy over a number of months or years. Ludgate also undertakes regular monitoring of funded businesses on behalf of some lenders and will act as the liaison point between your business and the lender.
Getting the right finance is crucial for any business.
Working capital finance is particularly important as it provides the oil that makes the wheels of the business turn.
At Ludgate we’ve seen many examples of businesses being stifled and even broken, not through having a lack of funding, but through having the wrong type of finance.
Funding is not just a finance issue, but an operational issue as well. Getting it right can mean better margins, smoother relationships with suppliers, increased sales and a real competitive advantage.
For manufacturers, working capital is crucial. Whilst some may have enough cash within the business to fund their own working capital cycle, most manufacturers will be reliant on some form of borrowing.
The traditional source of this funding was the bank, usually via the provision of an overdraft. This was simple to administer and flexible and security was provided by the assets of the business rather than directors personal property. Nowadays, most banks push their customers to Invoice Finance which can be expensive and complex to manage.
Within the P2P/Direct Lending market there is an alternative. Several providers now provide non-bank overdrafts; this is a pool of cash set aside for the business to draw upon and repay as and when required. It is a very similar concept to the old bank overdraft, except it is not tied to your bank account – you simply draw upon the facility as and when, transferring to the company bank account as required.
There is no complicated reconciliation to invoices, or funding directly tied to invoices; no need to query disallowed invoices or credit notes or calculate exactly how much funding is available on a day to day basis. This makes this type of funding good for businesses who don’t quite fit the IF model, such as construction or contracting, or businesses where customers pay in stages.
Unlike invoice finance, the overall credit limit is not tied to the amount of trade debtors outstanding at any one time; lenders will take account of stock, work in progress and any other assets within the business.
For example, we recently arranged a non-bank overdraft of £600,000 for a manufacturer of complex electronics. Most customers paid in stages against defined project steps, meaning that invoice finance did not work especially well and did not maximise the amount of funding available.
Haulage firms are usually paid on credit terms by their customers, typically 90 days.
Conversely, the two major
outgoings – fuel and wages - have to be paid almost immediately. This creates a
cashflow problem – a working capital gap that is structural to the industry.
Most haulage firms are not cash rich because of the high costs of assets and
general pressured margins, so need to turn to some kind of funding to address
this working capital gap.
In the past, this would have been supplied by the companys’ bank in the form of an overdraft. This was flexible, easy to administer and cost effective. In more recent years, as banks have turned away from overdrafts, the gap has usually been plugged by invoice finance.
This is less flexible, more expensive and reduces the risk to the bank. It can also be much more complex to administer. Banks also make a lot of money from invoice finance.
Within the P2P/Direct Lending market there is an alternative.
Several providers now provide non-bank overdrafts; this is a pool of cash set aside for the business to draw upon and repay as and when required. It is a very similar concept to the old bank overdraft, except it is not tied to your bank account – you simply draw upon the facility as and when, transferring to the company bank account as required.
There is no complicated reconciliation to invoices, or funding directly tied to invoices; no need to query disallowed invoices or credit notes or calculate exactly how much funding is available on a day to day basis. This reduces the administrative burden significantly and takes some pressure off the need to invoice clients quickly.
The overdraft limit is agreed at the outset and reviewed every twelve months, just like a traditional bank overdraft.
Costs can be lower than a Full Factoring line, and can remove much of the admin work required for an Invoice Discount line.