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Funding options for strong manufacturers.

Jaguar Land Rover's announcements of 1,000 new jobs to be created in Solihull and global sales up by 30 per cent are uplifting news for manufacturers across the West Midlands. But for some members of the supply chain the good news may be tempered with thoughts of how they might need to grow their own businesses to meet increasing demand and how that growth will be funded.

Neil Barrell, an automotive manufacturing sector specialist at Grant Thornton, says: "The Government has increased its commitment to manufacturing significantly, recognising it as essential to power UK plc's future growth. Just this month it announced that pounds 95 million of the Regional Growth Fund would be destined for small and medium enterprises (SMEs) considering investing in new capital assets leading to job creation.

"That's got to be good news for the region's manufacturing supply chain, which is capital intensive and has suffered from a lack of available finance of late. But for companies with real growth potential we are beginning to see an expansion of funding options, provided they can put forward a solid business case."

Simon Clewlow, associate director in Grant Thornton's corporate finance team in the Midlands, agrees: "The market for traditional debt finance has changed substantially and there's now a greater role for invoice discounting and other forms of asset-based lending (ABL). Historically, manufacturers have been reluctant to consider ABL; however, the stigma has dissipated and ABL is now seen as a more mainstream option rather than just being used by businesses in distress.

"In addition to the Business Growth Fund, which is equity finance, and the Government's Regional Growth Fund grant scheme, we've also recently seen the launch of a pounds 200 million mezzanine fund from Santander, which targets highgrowth businesses and sits between traditional debt and equity funding. Add these to existing Government-backed funding schemes and the range of funding options is widening all the time." Barrell adds: "What is absolutely critical is that manufacturers must accept the new banking environment and give their companies the best possible chance of securing the finance available. This may require engaging with professional advisers to challenge and critique the business plan to identify and address issues of concern to potential funders in order to increase the likelihood of successfully securing the necessary funding package.

"The message we hear every day is that banks are open for business and are looking for strong propositions and a wellconstructed plan. While it is certainly true that they are open for business, SME financing does remain relatively challenging and businesses need to keep an open mind to alternative sources of finance."

Clewlow concludes: "Funders' credit appetite can vary significantly by funder, sector and even region. Given the speed of change in that appetite and the funding options available, a professional adviser worth his salt can bring significant value to a proposition through his intimate knowledge of credit hot spots, market terms and structures.

"Banks receive a lot of approaches and they simply don't have a desire to delve behind the numbers if they show a difficult trading story. But if a bank or funder knows that a corporate finance adviser has spent their time and expertise on a proposition and have given it a 'sense check', it can make a real difference to the outcome."


Simon Clewlow, associate director in Grant Thornton's corporate finance team in the Midlands
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Title Annotation:Business
Publication:The Birmingham Post (England)
Date:Nov 24, 2011
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