Close Brothers Asset Finance regularly survey business owners in the sectors it funds, including manufacturing. Taken from its latest survey, the focus is on attitudes to ‘funding’, finding out, for example, if firms are planning on seeking funding; and if they are confident about getting access to loans to grow their business.
A key finding is that only half of the manufacturing firms are aware of Asset Finance, meaning a large number still haven’t taken advantage of the many benefits to be gained from leveraging value from their existing assets.
Access to funding
A third of manufacturing business owners say getting access to funding is a ‘major challenge’ and more difficult now than it was a year ago. A further 56% say it is a ‘moderate challenge’ and as difficult now to access finance as it was a year ago. Only 5% say it’s become easier.
Exactly 40% admit to having been declined access to finance by a bank in the last six months, but despite the additional challenges, 77% of manufacturing firms are planning on seeking funding for investment in 2023, although 63% have delayed their investment decisions because of market uncertainty.
Funding options ranked in order of popularity:
1. Bank loan 2. Credit cards
3. Overdraft 4. Invoice finance
5. Finance lease 6. Personal/family funding
7. Hire purchase 8. Asset-based lending
9. Operating lease 10. Refinance
11. Crowd/peer to peer
Unfortunately, 47% of manufacturing survey respondents stated they had missed a business opportunity in the last 12 months because of a lack of available finance.
Impact of energy price rises
The increases in the cost of doing business, compounded by significant energy price rises, have had a major impact on businesses in all sectors, including manufacturing, leading to 47% of firms in the industry needing to take out finance just to cover higher energy costs.
Nearly seven in 10 (67%) of business owners disclosed that their energy bills had risen, with a further 59% stating it had impacted their profitability. As a consequence, 91% have implemented various energy-saving measures, including (in order):
1. Switching off lights
2. Lowering the thermostat
3. Turning off the air conditioning
4. Insulation
5. Switching providers
Interestingly, well over half of firms polled said they would consider moving to a four-day week to save on energy costs, which is well below the UK average of 57%.
Main business concerns
Energy costs top the list of concerns for manufacturing firms, followed by inflation and higher materials costs – all of which have significantly contributed to the higher cost of doing business.
What are your main business concerns (respondents could tick up to five)?
-Energy costs l Inflation
-Materials supply l Interest rates
-Tax/VAT l Cash flow
-Late payments l Lack of skilled staff
-Competitors l Managing expansion
-Finding extra working capital
While late payments aren’t the biggest concern for business owners, well over half (59%) of manufacturing companies admitted that customers taking too long to settle their accounts was an ongoing problem for them.
The main impacts were:
-Late invoice payments make cashflow difficult to manage
–Time spent chasing payments detracting from other tasks
-Significantly impacting their ability to trade (and plan) effectively
Main business priorities
Perhaps unsurprisingly, many firms’ main priorities were split between achieving growth, developing new products and services, and being able to continue to trade.
The encouraging element of the data is that more manufacturing business owners are focusing on growth than survival.
-Achieving growth 23%
-Developing products/services 19%
-Survival 18%
-Investing in staff 16%
-Business consolidation 16%
-Paying down debts 9%
For more information please visit closeasset.co.uk/manufacturing
