If you have found your business in financial difficulty, without the necessary cash flow, you may have also found that your bank is no longer providing support. But don’t worry, there are alternative finance options out there to help you. 

 

Alternative Finance 

The growth of alternative finance in the last few years has provided businesses with the option to obtain finance from many other sources, not just the traditional banks. 

While there is a wide range of alternative finance providers available to businesses, navigating this marketplace isn’t easy. A middleman who knows the market can be a useful ally to have – they know the ‘sweet spots’ of the different lenders and can match lenders with the financial needs of your business. 

 

What is the Solution?

Alternative finance solutions vary depending on your need. Some are very short-term, others are longer. The aim of using one is to fix the funding problem – you need to try to avoid just deferring it for a while. 

Possible solutions include:

• Cash flow loans to cover VAT, Company Tax and Professional Indemnity fee payments.
  These loans provide cash to cover those quarterly or annual outflows of cash from your business that are lumpy and could otherwise cause a cashflow problem. 
• Commercial loans to provide your business with financial headroom.
  This could simply convert your current, short-term debt into medium-term debt to give you some headroom in your cash flow; or provide additional debt to boost your working capital. 
• Sale and leaseback.
  This would inject cash into your business from assets you already own. This is especially useful if the assets have previously been purchased for cash. 

 

In summary

A range of solutions are out there and can rescue your business from financial difficulty. Remember, not all alternative finance solutions or providers will be appropriate for your business or cash flow problem, so it is important to find the right one for you. 

 

What should you do next?

Having somebody alongside you who has experience and expertise in the alternative finance market would be invaluable. If you need help or advice with your funding problem, don’t hesitate to get in touch with Ampios. 

 

Alan Wilson – Specialist in Banking Relationships & Borrowing Arrangements 

 

Becoming a director of a company, whether it’s as you start your own business or have worked your way up the career ladder, is an exciting time filled with opportunity. Being a director can be very rewarding, satisfying and profitable – but it doesn’t come without risk. To do the best for your business, it is worth reminding yourself of the roles and responsibilities of directors.

 

The Role of the Board 

The Institute of Directors defines the role of the board as ensuring the company’s prosperity by collectively directing the company’s affairs while meeting the appropriate interests of its shareholders and relevant stakeholders. 

As a director, you are expected to establish and deliver the business’ purpose,  visions and values; delegate responsibilities to senior managers and be accountable to shareholders and stakeholders. You decide which tasks can be delegated and which will be best managed yourself, you review your successes and areas for improvement and plan for your future. 

But as well as your role and the personal and professional benefits this has for you, you should also be aware of the challenges and responsibilities that becoming a director brings and how you can overcome these. 

 

Legal Responsibilities 

The Companies Act 2006 details the additional legal responsibilities you carry when becoming a director: 

1. To act within powers in accordance with the company’s constitution and to use those powers only for the purposes for which they were conferred.
   

   As a director, it is important to be familiar with the articles of association for your business as they are likely to restrict your individual decision-making powers.

2. To promote the success of the company for the benefits of its members.
   

   You should act in good faith to promote success for the company and its shareholders. You need to consider the outcomes of your decisions for everybody involved in the business – employees, suppliers, customers and communities. It is also important to consider the impact your decisions will have on the environment, the reputation of your company and your business’ success in the longer term.
   
   All decisions should be made within the best interests of the company, not to benefit any individuals. However, be broad-minded when evaluating those interests, keeping in mind other stakeholders – the financial aspect is not the only perspective to consider.

3. To exercise independent judgment.
   

   As a director, you are legally obliged to exercise judgment independently and be prepared to question the decisions of others. If the existing board make decisions, it is important to question why that’s the best thing for the company. If you have a different approach in mind, you should voice it.
   
   

4. To exercise reasonable care, skill and diligence.
   

   As a director, you are expected to make decisions based on diligence, knowledge, skill and experience and are accountable for those decisions.If you have specific professional training (for example legal or accountancy training), you will be held to a higher level of accountability than less-qualified members of the board when decisions are made relating to your expertise.

    

5. To avoid conflicts of interest.
   

   A conflict of interest could arise if you have a close, personal interest in the business of competitors or other third parties such as suppliers. Alternatively, if you are responsible for a decision regarding an employee or potential employee with whom you have a close relationship (e.g. a family member or close friend), this would also constitute a conflict of interest.If you find that you have a conflict of interest, you must declare this to the board so that it can be resolved.

   It is important to ensure that your non-financial interests (personal beliefs and values, welfare and political views) do not take precedence over your lawful and ethical duties as a director.

6. Not to accept benefits from third parties.
   

   You must not accept benefits with the expectation of you doing, or not doing, something within your power to influence a decision.

7. To declare an interest in a proposed transaction or arrangement.
   

   If you have an interest in a deal or transaction, you must make it known. If a close friend or family member will benefit from you doing business with a specific supplier, you must declare this to your fellow board members.

You’re ready

Becoming a director should not be a daunting prospect nor anything to be frightened of. The risks are minimised as long as you comply with your legal responsibilities as a director. Following these rules will protect your business from malpractice and help to ensure your continued success. 

 

If you are worried about becoming a director and how to act in the best interests of your company, get in touch to discuss how we can help you. 

 

Martyn Jones, Specialist in Corporate Governance 

Discovering a cash flow problem within your business can create a daunting time of uncertainty and worry. Not only are you concerned with ensuring you meet your business demands, but you know that the bank, with money tied up in your business, is wanting to know how you’re dealing with it. 

Here is a guide to the ways that your bank may react. Use this to help you understand the potential changes to your lending agreement, anticipate these and consider how it could affect your business in the future. 

 

How will the bank react?

So far, they have supported you – backing your business plan, lending you money while ensuring that they monitor your progress. But now, they will see you as a greater risk to them and may make some changes to protect themselves. 

Your bank may have a variety of reactions to your funding problems, all changes made to your agreement with them to protect their lending. They may implement one or a combination of the following changes. 

• The offer of further support.
  Great news! Be aware though, this support will come at a price: additional fees or an increase to your current interest margin.
• An increase in price for their borrowing facilities.
  They could choose to do this in reaction to the increased risk to them. It may come in the form of a rise in interest margins or arrangement and monitoring fees.
• Heightened security requirements.
  The bank’s priority is to protect themselves so they may request a higher level of security – collateral against their money. They could request personal guarantees from the directors of your business, which may need to be supported by personal assets, rather than company assets. 

• The inclusion of additional financial terms and conditions.
  The bank could wish to monitor your business more closely to assess your recovery from your funding issue. They can request information of accounts every month, rather than quarterly, for example, or ask for weekly cash flow forecasts.
• The addition and/or tightening of bank loan covenants – such as increased debtor cover.
• Pressure on you to enter into costly bank products.
  Your bank may try to persuade you to consider some of their products to assist your business through your financial difficulty.
  This could be interest rate hedging (to provide protection from or minimise the impact of increasing interest rates); fixed interest rates or a switch from Overdraft to Invoice Financing – whereby its service fee would be based on your sales turnover.
• There is a risk that you be moved into “intensive care” by the bank.
  This could result in monitoring fees being levied.
• An independent assessment of the business.
  A bank could appoint independent accountants to assess your business on their behalf and report their findings back to them. The cost of this would be expected to be covered by you. 

 

How will these changes affect my business?

The overall impact of any of these changes would be a higher financial cost, management time being used differently and a period of worry and confusion. Thankfully, some people have experienced and overcome similar issues and are willing to advise, mentor or guide you through your funding problems. 

At Ampios, we have years of experience over a range of business sectors and have the expertise that you need. If you’re looking for help, support or advice, don’t hesitate to get in touch. 

 

Alan Wilson – Specialist in Banking Relationships & Borrowing Arrangements 

 

There are many situations when a business could find itself with funding problems. But what might bring about these problems in the first place and what can you do to prevent them? 

Financial Forecasting 

One cause of funding problems could be your financial forecasting – not budgeting and planning effectively. To escape this:

• Rather than focusing on the month-end financial forecasting, be aware of mid-month overdraft peaks. They can leave you with insufficient funds to cover the rest of your monthly expenses. 
• If you have borrowed money, ensure that your interest payments and capital repayments are achievable within your forecasted cash flow.  Having a debt service commitment that is too tight could leave you susceptible to a cash shortage or cause an overdraft excess. 
• Try to avoid having too much reliance on short-term debt. If you do, your loans may then require annual renewal and expose you to a withdrawal of loan arrangements or changes in the terms and conditions – usually not in your favour! 

 

Control of Cash

You could also expose your business to a funding problem due to mismanagement of cash. To avoid this:

• When purchasing capital assets, don’t use all of your cash. This could leave you short of future working capital for day-to-day trading purposes or finance business growth. 
• Have sufficient debtor control. Ensure you collect debts promptly and don’t allow yourself to be too reliant on one customer. If not, the interruptions to your cash flow could put pressure on your working capital and your borrowing limits. 

 

Preventing Funding Problems: In Summary

Take simple steps to prevent finding your business suffering from funding problems. Have awareness of your anticipated expenses and cash flow and don’t get caught by unexpected payments. This will allow you to maintain the confidence of your business’ funders and allow you to grow. 

 

Finding yourself with funding problems can leave you feeling overwhelmed or even helpless in your business, unsure of where to turn. At Ampios, we have years of experience across a range of sectors so if you need help, don’t hesitate to get in touch.

Alan Wilson – Specialist in Banking Relationships & Borrowing Arrangements 

Unsure about how well you are managing your cashflow? We are here to help you identify and overcome cashflow problems within your business.

Cash is like water. They can both go down the drain – but they both work best when they flow. Both can lead to the creation of riches, employment, life and vibrancy if well managed – even in tough times. However, when cash ceases to flow it’s likely to lead to a sick business in danger of terminal demise. 

Understanding your cashflow 

You’ll recognise when you have cashflow problems easily: you’re probably juggling who to pay and which payments you can afford to delay. Perhaps you’re not sure how you’re going to pay the wages next week and it’s likely that you’re having trouble sleeping soundly. 

What causes cash flow problems?

There can be a number of reasons: inadequate sales, not enough margin, changes in customer behaviour – including Covid-19, lack of stock… The list goes on.

The cause isn’t always under your control, but it can usually be addressed. What’s more, it needs to be addressed – otherwise, the problem will repeat itself. But right now, don’t run out of cash or you won’t have the luxury of time to fix underlying problems. 

What can I do? 

There’s a lot you can do to help yourself quickly. You need prompt action to address the short-term cash position. You may need the support of your bank which you’ll gain by making them have confidence in you. You need a clear plan.

A simple guide to solving a cashflow problem includes these steps:

• Understand and accept the problem
• Establish what you need and when
• Get buy-in from your whole team
• Identify sources of funding
• Identify savings that don’t fundamentally undermine the business
• Plan for action (with professional help, if you don’t have the skills or resource)

Your next steps

Finance specialists at Ampios, in conjunction with the North & West Lancashire Chamber of Commerce, are providing a free Business Cashflow Webinar on Wednesday 2nd September 2020 at 10.30 a.m. 

To put your business in a better situation, with a deeper understanding of the vital importance of cash and actions to take, book your place now.

Take a look at our other blogs about solving funding problems here. 

Businesses are facing tough times in light of Covid-19 and a deep recession. Some businesses will struggle and be beaten but if you’re a fighter, you can overcome these tough times. Focus on key priorities with agility, planning and determination and you can not only survive but thrive in the future. 

We can help you find the light at the end of the tunnel.

Here to Help

We want to be in your corner on this one, so we’ve put together a series of programmes and webinars designed to provide real-life solutions to what needs to be done. The first phase of free webinars commences on 2nd September 2020, dealing with perhaps the priority of all priorities: how not to run out of cash. 

 

Webinars

Cashflow – Cash is tightening and not sure what to do next? You absolutely, definitely must not run out of cash. We’ll show you how.

Wednesday 2nd September at 10.30 a.m.

 

Negotiation in Uncertain Times – There are many things a business will now have to negotiate, not just prices: do it badly and your business will suffer. We’ll show you how to do it well and get results.

Wednesday 9th September 2020 at 10.30 a.m.

 

Importance of a Good Banking Relationship – You’re likely to need the support of your bank, but that support will be conditional on the confidence of your bank in you. Our insightful banking experts will show you how to generate that confidence.

Wednesday 16th September 2020 at 10.30 a.m.

 

Urgent Brexit Preparations – Ignore it at your peril: many businesses will be affected and some of them in ways they haven’t realised. Whether you’ve done some preparation or not, don’t miss vital insights and actions as significant disruption draws closer.

Wednesday 23rd September 2020 at 10.30 a.m.

 

Investment Readiness – Investment comprising loans and equity will be tougher now but for the right businesses, with the right leaders, it can be done. Our experts will show you how to impress and gain the investment you need.

Wednesday 30th September 2020 at 10.30 a.m.

 

Leadership – With the disruption that’s coming, key people in your business will need to step up and lead from the front. If they do it well, they’ll be the reason the whole team is motivated and implements your game plan to succeed. Learn crucial insight and techniques to develop true leadership.

Thursday 8th October at 10.30 a.m.

 

Register Now

Your business will need to be match-fit to face these tough times, so get it ready to fight for its future by joining in these webinars. For full programme details and to register, click here. 

Consultant, Coach, Mentor, Adviser or NED?
It doesn’t matter how experienced you are or how long you’ve been in business, you can’t know everything. Sometimes, you just need a bit of help or simply pointing in the right direction.

 

Who can I turn to?

Ideally, what you need is someone experienced with a fresh pair of eyes and another perspective looking at the problem with you. Even better if they’ve seen it before and can show you how to deal with it. 

Who do I choose?

Persevere with a Google search and you’ll find that there is help out there in the form of consultants, coaches, mentors, advisers and NEDs (Non-Executive Directors).

The titles may be something you aren’t overly familiar with and can leave you feeling overwhelmed, wondering what these people do, how they do it and which will be best for you at this particular time? 

In this article, we will go through some of the different options of people you can approach when you need a bit of help.

 

Consultants

Consultants are ideal for specialist, individual projects that you have neither the knowledge nor time to complete yourself.

They are:

• Experienced, senior professionals who understand your business and your problem and offer a solution.
  This solution will be delivered in an agreed timescale for an agreed price. 
• Work closely with you and your staff on a project basis.
  They work with you for as long as it takes to complete the specific project. 

The stereotype of consultants giving the impression that they know it all, charging you for a glossy report with little or no fresh content and telling you how to run your business is largely false, so don’t be afraid to approach a good consultant for help.

 

Coaches

Coaches are used to help you to become better prepared to address your problem yourself. 

They: 

• Allow you to see your business from a different perspective, explore your thought processes and enable you to find alternative ways to do things. 
• Provide you with the confidence and mindset to face your business concerns. 
• Work with you for any length of time.
  Coaching relationships are usually for short periods but can last for years when necessary. 

Find a coach you can relate to, confide in and trust.

 

 

 

 

Mentors

Mentors are suitable for MDs or business owners who need somebody to share their experience with you and act as sounding boards for your ideas. 

They:

• Usually have had careers at a senior level in the public, private or 3rd sectors.
  Have experience of business management, facing and overcoming problems similar to yours. 
• Offer experienced guidance and advice for your ideas and plans. 
• Are often from a different business sector to you, offering a different perspective.
  If your problem is sector-specific or covered by specific constraints and regulations, you may need a mentor with similar business experience to you. 
• Mentoring relationships usually last between 3 and 12 months, depending on individual circumstances. 

Currently, a large portion of the UK is well covered by various business mentoring schemes which endeavour to match clients with mentors who have the appropriate experience. Often, these schemes are partially or even fully funded so make sure you check these out! 

 

Board Advisers

Board Advisers are perfect for longer-term guidance on business growth and business issues. 

They are:

• Independent Board Advisers who sit on your Board – even if the Board only consists of you and them. 
• Extremely experienced with a range of business skills and an appreciation of good governance principles, financial propriety and risk management. 
• Many work as part of a consortium (similar to ours at Ampios).
  This means they have immediate access to the expertise of others in addition to their own. 
• Ask considered questions, test your reasoning and thought processes – helping you to take your business where you would like it to go. 
• Bring a fresh perspective to the Board.
  Won’t be influenced by “How we normally do it”. 
• Do not have management responsibilities for your business.
  They are responsible along with the Board to hold management to account. 
• Not directors and are not registered as such with Companies House. 
• Self-employed and paid on an invoice or retainer basis.
  It is usual to agree renewable, 12-monthly contracts with them. 

 

Non-Executive Directors (NEDs)

NEDs are appropriate for adding credibility to your business or due to the requirements of your Articles or Objects. 

They are: 

• Independent Board Advisers, performing the same function as advisers. 
• Registered as Directors of your business with Companies House.
• Paid as Directors i.e. employees as opposed to the self-employed contractor status of a Board Adviser. 
• The number of NEDs you need on your board varies.
  This depends upon your Articles (or Objects, if you are a charity). 
• Have a vast network of useful contacts.
  They will be willing to share these with you if needed. If they haven’t experienced your problem themself, they will know someone who has. 
• Work with you for a fixed time, usually 3 years. 

 

Which is right for me?

All of the above professionals come with their advantages and potential problems. Hopefully, knowing the nature of your problem and the needs of your company will assist you in choosing the best help for you. 

Be aware that all of these groups have people who are more experienced or qualified than others. So you must conduct research and find someone who can demonstrate that they have the skills, knowledge and practical experience to help you. But the help is out there and you are not on your own. 

 

We can make finding the right help for you simple. 

At Ampios, all members of our team are Board Advisers and all have previously worked as Consultants. Most of us are NEDs. Many of us are also Mentors and we have some excellent Executive Coaches in our ranks. 

Together, we’ve seen it all and done it all. So, if you are searching for help, don’t hesitate to get in touch.

 

Martyn Jones, NED, Board Adviser and Mentor 

 

If your business suffers a funding problem, there is a possibility that it may cause you to breach a financial covenant. What happens if you do and how can you fix it?

 

What is a Covenant?

Covenants are the terms set out within a loan that require you (as the borrower) to fulfil specific conditions. Also, they may restrict your actions or activities. The finance documentation from the bank or other lenders will invariably contain covenants – and you will have signed, agreeing to adhere to them for the duration of your borrowing arrangement.

Covenants might be:

• Financial – minimum interest cover, debtor cover, debt service cover.
• Information based – providing management and annual accounts within specific time frames (e.g. annual accounts within 6 months of your financial year-end).

 

 

Consequences of Breach of Covenant

A breach of an agreed covenant will have negative consequences. So, if you have breached a covenant or believe you might breach a covenant, then you need to take action. It is helpful to understand how different stakeholders will respond to a covenant breach.

 

Lender’s Reaction

This is an opportunity for the lender to re-price, blaming the increased risk to them. The lender could also request additional security or place the business into “intensive care”.

If you breach a borrowing limit you could also incur this course of action.

 

Auditor’s Reaction

A continuing breach of covenant will concern your auditors when they sign off your business’ Annual Accounts to be filed at Companies House. If your auditor provides a qualified opinion, due to these issues, then that could affect your business creditworthiness. The credit rating agencies and, perhaps, your suppliers will look at your Annual Accounts for any negative disclosure.

 

Suppliers’ Reaction

If your credit score is lowered due to a breach of covenant, your suppliers could worry about your ability to pay and reduce your credit limits or, even, request payment before supplying goods.

 

As such, a breach of covenant could have knock-on effects on your business and exacerbate your original financial problem. Early action is always useful. Telling your bank or supplier that you have a problem my sound like washing your dirty laundry in public but keeping quiet and allowing them to find out after the event will only erode their trust.

 

 

 

 

What should you do next?

The consequences of a breach of covenant could significantly impact your ability to trade but there are people out there who can help.

Ampios have years of experience across a range of sectors. If you need support with any funding problems within your business, don’t hesitate to get in touch.

 

Alan Wilson – Specialist in Banking Relationships & Borrowing Arrangements